Reference no: EM133160691

Question - Tweedle Jackets make and sell Tweed Jackets, which never go out of style. Tweedle Jackets uses a process costing with steps approach to understand the costs of their jackets. The process has two steps: first, a jacket is made, and second, the elbow patches are sewn on. For this question, we consider the second step of the process, called the Elbow Patch division, for which a completed jacket without elbow patches is transferred in. The Elbow Patch division employs two laborers, Tweedledee and Tweedledum, both of whom are expected to work full time (160 hours per month). Tweedledee is paid $20/hour, and Tweedledum (who is better at sewing on patches) is paid 30$ per hour. Both are paid overtime (at 1.5x) for any hours over 160 worked in a month.

The monthly budgeted costs for the Elbow Patch division are as follows:

Budgeted Production	400 jackets
Tweed Jackets transferred in (400 jackets)	$150 / jacket
Elbow Patch Material (132 yds total, for 0.33 yd/jacket)	$5 / yard
Tweedledee's labor (160 hours total, for 0.4 hr/jacket)	$20 / hour
Tweedledum's labor (160 hours total, for 0.4 hr/jacket)	$30 / hour
Rent ($5,000 per month, allocated based on jackets)	$5,000 (total)

The Elbow Patch division considers rent a fixed overhead, which is applies to products on the basis of jackets produced.

This month, Tweedledum missed a week of work to stage a battle for a lost girl (so he claimed), thus Tweedledee had to fill in by working an additional 75 hours of overtime. Additionally, only 390 jackets were actually produced. The actual data for this month (with the budgeted costs as above) are as follows:

Expense	Total Cost
Tweed Jackets transferred in (390 jackets)	$57,330
Elbow Patch Material (140 yds total)	$650
Tweedledee's labor (235 hours total)	$5,450
Tweedledum's labor (120 hours total)	$3,600
Rent (allocated based on 390 jackets)	$4,985

The below questions refer to variance analysis performed on the Elbow Patch division, which seeks to understand the effect of the labor hour change on overall cost outcomes. To this end, it is recommended (to answer some of the questions) to keep the two employee's labor costs separate.

Note: This is not a transfer pricing issue, think of it more like the transfers that happen in process costing with steps, i.e. Jewel department A transferring to B. Additionally, all the questions below are with respect to the Elbow Patch division.

Required -

1. What is the total actual cost for the month?

2. What is the actual cost per jacket produced?

3. What is the total budgeted cost for the month?

4. What is the standard/budgeted cost per jacket produced?

5. What is the primary (largest) cause of the difference between actual cost per unit produced in the framing department and the standard cost per unit produced?

a: Favorable Price Variance

b: Unfavorable Price Variance

c: Favorable Efficiency Variance

d: Unfavorable Efficiency Variance

e: Favorable Volume Variance

f: Unfavorable Volume Variance

6. What is the total variance for the month?

7. Is the total variance for the month favorable or unfavorable?

a: Favorable

b: Unfavorable

c: Neither, total variance is 0

8. What is the efficiency variance for the transferred in tweed jackets?

9. Is the efficiency variance for the transferred in tweed jackets favorable or unfavorable?

a: Favorable

b: Unfavorable

c: Neither, total variance is 0

10. What was Tweedledee's efficiency variance for the month?

11. Was Tweedledee's efficiency variance favorable or unfavorable?

a: Favorable

b: Unfavorable

c: Neither, total variance is 0

12. What was Tweedledum's efficiency variance for the month?

13. Was Tweedledum's efficiency variance favorable or unfavorable?

a: Favorable

b: Unfavorable

c: Neither, total variance is 0

14. Given Tweedledee worked overtime to cover for Tweedledum, explain whether Tweedledee performed better or worse in this month, citing your variances from above.

15. How would you use variance analysis to evaluate the performance of Tweedledee and Tweedledum?