Cost Management Problem

Mina’s Tricks ‘N Treats

Mina’s Tricks ‘N Treats sells premium dog treats and cute dog accessories for the most fashion forward dogs around. Your mission, should you choose to accept it, is to provide the owner of Mina’s Tricks ‘N Treats with some helpful cost analysis. See, Mina’s Tricks ‘N Treats isn’t doing so hot in comparison to its competitors and the owner wants to know why. All the information to produce Mina’s famous dog biscuits has been gathered and is presented for your analysis below.

Mina’s Tricks ‘N Treats requires two types of direct labor to make dog biscuits: Production and Inspection. Production employees are paid $10.00 per hour. Inspection employees are paid $20.00 per hour and inspections are performed in batches of 300 biscuits. Standards have been established for one biscuit.

Production…………………………………………………………. 1 min per biscuit

Inspection………………………………………………………….. 2 hours per batch

During the current month Mina’s Tricks ‘N Treats produced 300,000 biscuits and incurred the following direct labor costs:

Production……………………………….. 4,900 hours…………………………. $52,150

Inspection………………………………… 2,200 hours…………………………. $43,000

Mina’s Tricks ‘N Treats requires two types of direct materials to make dog biscuits: Peanut Butter and Bacon. Standards have been established based on one biscuit.

Peanut Butter……………………………………………………. .6 unit at $0.30 per unit

Bacon………………………………………………………………… .4 unit at $0.60 per unit

Also during the current month, Mina’s Tricks ‘N Treats noted direct material costs to be as follows:

Materials purchased:

Peanut Butter…………………………………………………… 200,000 units at $0.28 per unit

Bacon……………………………………………………………….. 120,000 units at $0.65 per unit

Of the materials purchased, the following were used:

Peanut Butter…………………………………………………… 198,000 units

Bacon……………………………………………………………….. 113,000 units

Mina’s Tricks ‘N Treats has the following standard overhead rates:

Standard variable overhead rate………………………. $6.00 per direct-labor hour

Standard quantity of direct labor………………………. .02 hours per unit of output

Budgeted fixed overhead………………………………….. $100,000

Budgeted output……………………………………………….. 310,000 biscuits

During the current month the actual overhead results were as follows:

Actual variable overhead……………………………………. $50,000

Actual fixed overhead………………………………………… $63,000

Actual direct labor………………………………………………. 7,100 hours

Required:

Prepare variance analysis based on the above information for each of the listed variances.

a. Direct labor rate variance

b. Direct labor efficiency variance

c. Direct labor mix variance

d. Direct labor yield variance

e. Direct material price variance

f. Direct material quantity variance

g. Direct material mix variance

h. Direct material yield variance

i. Variable overhead spending variance

j. Variable overhead efficiency variance

k. Fixed overhead budget variance

l. Fixed overhead volume variance