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PART2:

of the Variance between Standard and Actual costs and materials

Standard costs for 500 chairs

Task

Material

Rate ($)

Total amount

Metal tubing (meters)

3,000.00

3.00

9,000.00

Leather (Square meters)

1,000.00

7.00

7,000.00

Padding (Kgs)

1,500.00

4.00

6,000.00

Direct Labour (Hours)

2,000.00

15.00

30,000.00

52,000.00

Actual costs for 500 chairs

Task

Material

Rate ($)

Total amount

Metal tubing (meters)

3,100.00

3.05

9,455.00

Leather (Square meters)

1,100.00

7.02

7,722.00

Padding (Kgs)

1,600.00

4.10

6,560.00

Direct Labour (Hours)

1,800.00

15.15

27,270.00

51,007.00

Theanalysis will evaluate the manufacture of 500 units of chairs. Beloware some of the items that have varied.

Task

Standard Materials

Actual Materials

Variance

Metal tubing (meters)

3,000.00

3,100.00

(100)

Leather (Square meters)

1,000.00

1,100.00

(100)

Padding (Kgs)

1,500.00

1,600.00

(100)

Direct Labour (Hours)

2,000.00

1,800.00

200

Thereis a continuous increase in the materials by 100 units for themanufacture of 500 of massage chairs.

Evaluationof variations of price per unit for the manufacture of massage chairs

Task

Standard prices

Actual Prices

Variance

Metal tubing (meters)

3.00

3.05

0.05

Leather (Square meters)

7.00

7.02

0.02

Padding (Kgs)

4.00

4.10

0.10

Direct Labour (Hours)

15.00

15.15

0.15

Thereis an increase in the price per unit for each material and the labourrates. The variation could result to increase in the budgeted valueshence increase in the total amount projected for the manufacturingprocess. In the calculation for unit cost of the 500 units of massagechairs, the actual costs is slightly lower than the standard rate dueto a reduction in the labour used for the manufacturing process.

Achange in one variable results to a shift of unfavorable expectationto favourable. The manufacturing process, according to the dataabove, experiences increase price per unit hence there was anexpectation of increased cost but a reduction in labour resulted to afavourable result.

References

Zimmerman, J. (2014). Accounting for Decision Making and Control. New York: McGraw-Hill.

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