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23 Nov 2019

Southside Pizzeria wants to improve its ability to manage the ingredient costs associated with making and selling its pizzas. For the month of June, the company plans to make 1,000 pizzas. It has created a planning budget that includes a cost formula for mozzarella cheese of $2.40 per pizza. At the end of June, Southside actually sold 1,100 pizzas and the actual cost of the cheese that it used during the month was $2,632. Required: What is the mozzarella cheese activity variance for June? What is the mozzarella cheese spending variance for June? Assume that the company establishes a price standard of $0.30 per ounce for mozzarella cheese and a quantity standard of eight ounces of cheese per pizza. Also, assume that Southside actually used 9,400 ounces of cheese during the month to make 1,100 pizzas. What is the materials price variance for mozzarella cheese for June? What is the materials quantity variance for mozzarella cheese for June? What is the materials spending variance for mozzarella cheese for June?

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Trinidad Tremblay
Trinidad TremblayLv2
25 Sep 2019
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Related questions

I need for you to look at a couple of things and give me some guidance.

The workers in the assembly department are paid three different wages. Senior Assemblers, who have been with the company for more than five years, are paid $15 per hour. Experienced Assemblers, who have been with the company between one and five years, are paid $12 per hour. Novice Assemblers, who have been with the company less than one year, are paid $10 per hour. Assemblers from each class can perform the assembly tasks necessary to assemble a unit of XYZ but with more or less efficiency. I expect it to take four (4) direct labor hours to assemble each unit of XYZ.

When we developed the standard labor cost for the assembly department, we expected that 20% of the hours worked in the department would be performed by Senior Assemblers, 50% by Experienced Assemblers, and 30% by Novice Assemblers.

During May, 800 units of XYZ were produced using 3,360 hours of assembly labor. Because of an unforeseen expansion in the demand for XYZ, this was many more hours than expected. Therefore, Senior Assemblers worked 15% of the labor hours, Experienced Assemblers worked 45%, and Novice Assemblers worked 40%. Please address the following:

Determine the standard assembly labor cost per hour.

Determine the actual assembly labor cost per hour during May.

Compute the direct labor rate and efficiency variances for May. Don't forget to indicate whether those variances are unfavorable or favorable.

Based on the information given, what action, if any, would you expect me to take in response to the labor variances that you computed in part (3)?

Also, I am concerned about whatҀ™s going on in the cafeteria. The standard cost of mozzarella cheese that goes into our pizza is 1/2 pound per pizza @ $2.50 per pound. The standard price per pound is the price that we have paid for cheese for the last few months. We normally use about 2,000 pounds of mozzarella each month. In the past, mozzarella has been purchased 1,000 pounds at a time. For May, our purchasing agent was offered a 6% discount on the price per pound, to $2.35, if we purchased 2,000 pounds at a time. He chose to do so.

Compute the direct materials price variance and indicate favorable or unfavorable on the purchase of 2,000 pounds of cheese at $2.35 instead of the standard price of $2.50. NOTE: I am asking for just the PRICE variance.

In the past, about 1% of the cheese was thrown out due to spoilage. In May, because of the larger quantity purchased at once, 10% of the cheese spoiled and was thrown out. Did the favorable direct materials price variance that you computed in part (1) reflect a situation that was favorable from the standpoint of the company? Support your answer with computations. (Hint: think about the money lost due to the spoilage, both under the old way [1,000 pounds at a time times 2] or the new way [2,000 pounds at a time].)

During May, 1,800 pounds of cheese were used to produce 3,580 pizzas. Compute the May direct materials quantity variance and indicate favorable or unfavorable. NOTE: I am asking for just the QUANTITY variance.

What role does spoilage play in your answer to part (3)?

Tharaldson Corporation makes a product with the following standard costs:

  Standard Quantity or Hours Standard Price or Rate Standard Cost per Unit
 Direct material 6.6 ounces $ 5.00 per ounce  $33.00
 Direct labor 0.8 hours $ 10.00 per hour $8.00
 Variable overhead 0.8 hours $ 5.00 per hour $4.00

The company reported the following results concerning this product in June.

 Originally budgeted output 2,000 units
 Actual output 2,500 units
 Raw materials used in production 19,000 ounces
 Purchases of raw materials  21,500 ounces
 Actual direct labor-hours 4,900 hours
 Actual cost of raw materials purchases  $40,500
 Actual direct labor cost $12,000
 Actual variable overhead cost $3,000

The company applies variable overhead on the basis of direct labor hours. The direct material purchases variance is computed when the materials are purchased .

The materials quantity variance for June is: 

Tharaldson Corporation makes a product with the following standard costs:

Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit
Direct materials 7.3 ounces $ 3.00 per ounce $ 21.90
Direct labor 0.7 hours $ 17.00 per hour $ 11.90
Variable overhead 0.7 hours $ 6.00 per hour $ 4.20

The company reported the following results concerning this product in June.

Originally budgeted output 2,700 units
Actual output 2,300 units
Raw materials used in production 18,500 ounces
Purchases of raw materials 21,600 ounces
Actual direct labor-hours 3,800 hours
Actual cost of raw materials purchases $ 42,100
Actual direct labor cost $ 12,700
Actual variable overhead cost $ 3,350

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The materials price variance for June is:

Multiple Choice

$22,700 U

$22,700 F

$1,944 F

$1,944 U

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