Ralston Corporation Makes a Product with the Following Standard Costs

question 81

Essay

Ralston Corporation makes a product with the following standard costs:
$$\begin{array} { | l | c | c | c | } \hline \text { Imputs } & \begin{array} { c } \text { Standard } \\\text { Quantity } \\\text { or Hours }\end{array} & \begin{array} { c } \text { Standard } \\\text { Price } \\\text { or Rate }\end{array} & \begin{array} { c } \text { Standard } \\\text { Cost } \\\text { Per Unit }\end{array} \\\hline \begin{array} { l } \text { Direct } \\\text { materials }\end{array} & 6.9 \text { liters } & \begin{array} { c } \$ 5.00 \text { per } \\\text { liter }\end{array} & \$ 34.50 \\\hline \text { Direct labor } & 0.3 \text { hours } & \begin{array} { c } \$ 17.00 \text { per } \\\text { hour }\end{array} & \$ 5.10 \\\hline \begin{array} { l } \text { Variable } \\\text { overhead }\end{array} & 0.3 \text { hours } & \begin{array} { c } \$ 6.00 \text { per } \\\text { hour }\end{array} & \$ 1.80 \\\hline\end{array}$$ The company reported the following results concerning this product in August. $\begin{array}{|lr|}\hline \text { Originally budgeted output } & 8,600 \text { units } \\\hline \text { Actual output } & 8,400 \text { units } \\\hline \text { Raw materials used in production } & 58,330 \text { liters } \\\hline \text { Actual direct labor-hours } & 2,310 \text { hours } \\\hline \text { Purchases of raw materials } & 62,500 \text { liters } \\\hline \text { Actual price of raw materials } & \$ 4.90 \text { per liter } \\\hline \text { Actual direct labor rate } & \$ 17.10 \text { per hour } \\\hline \text { Actual variable overhead rate } & \$ 5.50 \text { per hour } \\\hline\end{array}$
The materials price variance is recognized when materials are purchased.Variable overhead is applied on the basis of direct labor-hours.Required:
a.Compute the materials quantity variance.
b.Compute the materials price variance.
c.Compute the labor efficiency variance.
d.Compute the direct labor rate variance.e.Compute the variable overhead efficiency variance.f.Compute the variable overhead rate variance.

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Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term and long-term obligations, calculated as current assets divided by current liabilities.

Acid-test Ratio

A financial metric that assesses a company's ability to cover its short-term liabilities with its most liquid assets, excluding inventory.

Current Ratio

This ratio evaluates the ability of a business to cover its obligations due in the next year, by calculating the proportion of its current assets to its current liabilities.

Working Capital

An indicator of a company's short-term financial health, calculated as current assets minus current liabilities.