# Essay about Kaufmann Manufacturing Case Study

Question 1 1H- (\$28,800) 2H- \$1619, 800 \$93= 1,619,800 dollars \$3= (3dollars × 1,619,800 dollars)/ 93 dollars =52,251.61 dollars The amount of profit increase as a result of the higher price of Kaufmann’s finished goods equals to 52,251.61 dollars for the price change of 3 dollars. The finished goods price changed from 90 dollars to 93 dollars. Question 2(a)

Actual Direct labour cost =4,813,000 dollars Budgeted Direct Labour cost= 4,400,000 dollars Variance = Actual Direct labour cost – Budgeted Direct Labour cost =4,813,000 dollars – 4,400,000 dollars = 413,000 dollars The variance is said to be unfavorable because the actual amount spent on direct labour is more than the amount that is budgeted for, meaning that Kaufmann spent more on direct labour costs than the amount that Kaufmann had budgeted. Kaufman costs of labor were above the budget (Management accounting, 2014). Question 2(b)

Actual Direct Hours= 425,000 hours Actual Labor Rate per hour = 11.325 dollars Standard Labor Rate per hour =11 dollars Labour rate variance: = (Actual direct hours × Actual labour rate) – (Actual direct hours × Standard labour rate) = (425,000 hours ×11.325 dollars) – (425,000 hours × 11 dollars) =4,813,125 dollars – 4, 675,000 dollars = 138,125 dollars Labour rate variance equals to 138, 125 dollars. The labor rate variance is therefore said to be unfavorable. It is because the actual amount which Kaufmann Manufacturing Company spent on direct labour is more than the standard amount. The company spent more on direct labor than the stipulated standard amount of direct labor. Question 2c.

Actual Direct Hours = 425,000 hours Total standard hours=400,000 hours Standard labor rate per hour =11 dollars Labor Efficiency Variance: = (Actual Direct Hours × Total standard hours) – (Total standard hours × Standard labor rate) = (425,000 hours × 400,000 hours) – (400,000 hours × 11 dollars) =170,000,000,000 – 4,400,000 = 169,995,600,000 Note: As a check of your work, you should confirm that your Labor Rate Variance plus your Labor Efficiency Variance equals the \$413,000 Labor Variance shown in question 2a (within \$1,000 to account for rounding) 3(a)

Actual materials costs= 2,281,000 dollars Budgeted material costs= 2,400,000 dollars Variance of costs= Actual materials costs – Budgeted material costs = 2,281,000 dollars – 2,400,000 dollars = – 119,000 The material variance is therefore said to be favorable. It is because the actual amount spent in materials is lower than the amount budgeted for materials. The amount spent for materials was within the budget and lower than the budget(Seal, & Garrison, 2008). Question 3(b)

Actual Quantity of material used= 590,000 units Actual Price of material per pound=3.866 dollars Standard Price of material per pound= 4 dollars Material Price Variance: = (Actual Quantity of material used × Actual Price of material per pound) – (Actual Quantity of material used × Standard Price of material per pound) = (590,000 units × 3.866 dollars) – (590,000 units × 4 dollars) =2,280,940 -2,360,000

= -79,060 The material price variance equals to -79,060. The variance is therefore said to be favorable. It is because the actual price of material is lower than the standard price of the material. The amount spent for the materials was within the budget (Davis, & Davis, 2012) .

Question 3(c) Actual Quantity of Material Used= 590,000 units Standard Price of Material per pound=4 dollars Standard Quantity of Material=200,000 units Material Quantity Variance: = (Actual Quantity of Material Used× Standard Price of Material per pound) – (Standard Quantity of Material × Standard Price of Material per pound) = (590,000 units × 4 dollars) – (200,000 units × 4 dollars) =2,360,000 dollars – 800,000 dollars

=1,560,000 dollars The material quantity variance equals to 1,560,000 dollars. It is therefore said to be unfavorable because the actual amount spent on material quantity is more than the standard or planned quantity. It means that the material quantity of Kaufmann manufacturing company was way above the budget Question 4(a)

Actual power cost= 1,200,000 dollars Standard power cost = 1,200,000dollars Variance = Actual power cost – standard power cost = 1,200,000dollars – 1,200,000dollars =0 dollars The total power cost variance equals to 0 dollars. It is therefore seen that the variance is neither favorable nor unfavorable because it is the same amount as the one that is planned for by Kaufmann manufacturing company. Question 4(b)

Actual Quantity of Finished Goods produced= 188,000 units Actual Power Rate per unit of Finished Goods=6.383 dollars Standard Power Rate per unit Finished Goods= 6.000 dollars Power Rate Variance: = (Actual Quantity of Finished Goods produced × Actual Power Rate per unit of Finished Goods) – (Actual Quantity of Finished Goods produced × Standard Power Rate per unit Finished Goods) = (188,000 units × 6.383 dollars) – (188,000units × 6 dollars) =1,200,004 dollars – 1,128,000 dollars

=72,004 dollars The power rate variance equals to 72, 0004 dollars. It is therefore seen that the power rate variance is unfavorable. It is because the actual amount of power rate is more than the amount budgeted for the power rate. Kaufmann’s power rate is above the budget. Question 4(c)

Planned production of finished goods= 200,000 units Actual production of finished goods= 188,000units I expect the value of the power quantity variance to be 12,000units. This because the value of the actual quantity of finished goods produced is lower than the amount of production of finished goods that Kaufmann had planned. It means that the variance is favorable because of the lower amount of costs showing that Kaufmann Manufacturing Company spent less than amount of the budget.