Application: Calculating Variances and Analyzing the Results
Standard Cost Sheet: Massage Chair
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Metal tubing
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6 meters @ $3
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$18.00
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Leather
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2 square meters @ $7
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$14.00
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Padding
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3 kilograms @$4
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$12.00
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Direct labor
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4 hours @ $15
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$60.00
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Total standard cost
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$104.00
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This month, Spine Line manufactured 500 massage chairs. The following costs were incurred:
Actual Costs Incurred for the Month: Massage Chair
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Metal tubing
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3,100 meters
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$9,455
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Leather
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1,100 square meters
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$7,722
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Padding
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1,600 kilograms
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$6,560
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Direct Labor
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1,800 hours
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$27,270
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Total cost
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$51,007
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*Suppose you are the senior controller for Spine Line and you plan to perform a variance analysis of the massage chairs manufactured to determine if the standards are being met. Once you have completed the analysis, you plan to show it to the production department manager and ask for an explanation of any variances that you believe should be examined.
The Assignment:
Part 1: Put Both Charts on On Excel Sheet , Also a separate box for
• Calculate all materials and labor variances in a spreadsheet by using a program like Excel. Be sure to include price, quantity, wage rate, and labor efficiency variances.
Part 2: Prepare a memo to your subordinate, using a program like Word Document!!!!
• Summarize and analyze the actual costs in relation to the standard costs incurred for the month.
• Ask for clarification of any variances that need to be investigated.
• Be sure to include whether alternatives exist for the future of the organization and explain how the results of the variance analysis might influence those alternatives.