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(solution) I have answered part A and B, but I am lost as to what I need to


I have answered part A and B, but I am lost as to what I need to put on part C and D.  Thanks


28. Natural Gardens make recyclable pots for plants and uses JIT to manage inventories and production. The following are standards for a typical one-gallon pot:

Annual Material Standards

32 ounces of Component X x $0.02 $0.64

2 ounces of Component Y x $0.05 $0.10

$0.74

Current Material Standards

27 ounces of Component X x $0.02 $0.54

4 ounces of Component Y x $0.05 $0.20

$0.74

In-house experiments indicated that changing the material standard would make the pots stronger, so the company issued an engineering change order for the product in February; this ECO established the current material standards. March production was 8,000 pots. Usage of raw material (all purchased at standard price) in March was 220,000 ounces of Component X and 31,000 ounces of Component Y.

  1. a. Calculate the material quantity variance. Annual standard Component X (32 ounces x 0.02) 0.64 Component Y (2 ounces x 0.05) 0.10 0.74Current standard Component X (27 ounces x 0.02) 0.54 Component Y (4 ounces x 0.05) 0.20 0.74 Production during month 8,000 Usage during month Component X (220,000 x 0.02) 4,400 Component Y (31,000 x 0.05) 1,550 Total cost of material used 5,950Material quantity variance Component X (8,000 x 27 x .02) 4,320 Component Y (8,000 x 4 x .05) 1,600 Material cost at current standard 5,920 Actual material cost (5,950) Material quantity variance $ 30 F
  2. b. Calculate the ECO variance.Engineering change variance for material Component X (8,000 x 32 x .02) 5,120 Component Y (8,000 x 2 x .05) 800 Material cost at annual standard 4,320 Material cost at current standard (5,920)ECO variance 1,600 U
  3. c. Summarize the company?s effectiveness in managing March production costs.
  4. d. Comment on the circumstances in which a company would institute an ECO that results in the expected product cost being unchanged.

Part C:

 

If company follow exact current material standard then its use of Component X would have been

 

216,000 ounces (27 x 8,000) and 32,000 ounces of Component Y (4 x 8,000) with a total cost of...

 


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