HW Chapter 13 Excel

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Lab Insight: In managerial accounting, the use of standard costs and the calculation of variances are useful in performance evaluation. Why did the actual materials and labor usage vary from what is expected?

Yordano Incorporated manufactures purses using Columbian leather in Cucuta, Colombia. These sell at a premium in export markets. Yordano is attempting to reduce its costs to become more profitable. Yordano establishes standard costing for both direct materials and direct labor in order to evaluate actual spending by evaluating variances. Yordano could hire cheaper labor but wonders if cheaper laborers would waste more material than if Yordano used more expensive labor. A performance evaluation of materials and labor variances will allow him to do that.

A favorable cost variance is present when the actual cost is less than the standard cost. An unfavorable cost variance occurs when the actual cost is greater than the standard cost.

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1. Using performance standards for the materials used in manufacture of purses, calculate the direct materials variances, including price and quantity variances.
2. Use conditional formatting to identify favorable and unfavorable variances.

Ask the Question: How can an evaluation of direct materials and direct labor variances contribute to better profitability?

Master the Data: Open the template we’ll use for our analysis, namely Excel file Lab 13-2 Data.xlsx.

Note that the direct materials variance calculations are on the upper part of the spreadsheet with the direct labor variance calculations in the lower part.

Note the direct materials variance is comprised of a materials price variance and materials quantity variance. Likewise, note that the direct labor variances are comprised of a labor rate variance and labor efficiency variance.

Yordano will make 5,000 purses with standard quantity of leather per purse of 20.03 square inches of material at $0.25/square inch. The actual quantity for those 5,000 purses produced was of leather per purse 20.53 square inches of material at 0.26/square inch. The standard labor to produce each purse is one hour for each purse with a cost of $7.70/hour. The actual labor used to produce each purse was 1.06 hours at $7.50/hour.

We’re now ready to perform the analysis.

Software needed

• Excel
• Screen capture tool (Windows: Snipping Tool; Mac: Cmd+Shift+4)

Data: Lab 13-2 Data.xlsx

Perform the Analysis: Refer to Lab 13-2 in the text for instructions and steps for each of the lab parts.

Upload the Word or PDF document containing your Lab screenshots using the button below.

Note: Please submit your file attachment response in one of the approved file formats; Word file (.doc or .docx), Excel file (.xls or .xlsx), or PDF. To submit photo or image files please paste them into Word or PDF. Consult with your instructor as needed on their preferred file attachment format.

Take a screenshot of your variance analysis, paste it into a Word document named “Lab 13-2 SS.doc” and label the screenshot Submission 1.

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