baby_2
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baby_2

Course Number: FIN 320 320, Spring 2012

College/University: University of Phoenix

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Solutions Guide: Please reword the answers to essay type parts so as to guarantee that your answer is an original. Do not submit as your own. Vintech Company is planning to produce 2,000 units of product in 2011. Each unit requires 3 pounds of materials at $6 per pound and a half hour of labor at $14 per hour. The overhead rate is 70% of direct labor. (a)compute the budgeted amounts for 2011 for direct materials...

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Guide: Solutions Please reword the answers to essay type parts so as to guarantee that your answer is an original. Do not submit as your own. Vintech Company is planning to produce 2,000 units of product in 2011. Each unit requires 3 pounds of materials at $6 per pound and a half hour of labor at $14 per hour. The overhead rate is 70% of direct labor. (a)compute the budgeted amounts for 2011 for direct materials to be used, direct labor, and applied overhead. (b)compute the standard cost of one unit of product. (c)what are the potential advantages to a corporation of using standard costs? (a) Direct materials: (2,000 X 3) X $6 = $36,000 Direct labor: (2,000 X 1/2) X $14 = $14,000 Overhead: $14,000 X 70% = $ 9,800 (b) Direct materials: 3 X $6 = $18.00 Direct labor: 1/2 X $14 = 7.00 Overhead: $7 X 70% = 4.90 Standard cost: $29.90 (c) The advantages of standard costs which are carefully established and prudently used are: 1. Management planning is facilitated. 2. Greater economy is promoted by making employees more cost-conscious. 3. Setting selling prices is facilitated. 4. Management control is enhanced by having a basis for evaluation of cost control. 5. Variances are highlighted in management by exception. 6. Costing of inventories is simplified and clerical costs are reduced The standard cost of Product B manufactured by TLC Company includes three units of direct materials at $5.00 per unit. During June, 28,000 units of direct materials are purchased at a cost of $4.70 per unit, and 28,000 units of direct materials are used to produce 9,000 units of Product B. (a)compute the total materials variance and the price and quantity variances. (b)repeat (a), assuming the purchase price is $5.20 and the quantity purchased and used is 26,200 units. (a) Total materials variance: = ( AQ X AP ) - ( SQ X SP ) = (28,000 X $4.70) - (27,000* X $5.00) = $131,600 - $135,000 = $3,400 F *9,000 X 3 Materials price variance: = ( AQ X AP ) - ( AQ X SP ) = (28,000 X $4.70) - (28,000 X $5.00) = $131,600 - $140,000 = $8,400 F Materials quantity variance: = ( AQ X SP ) - ( SQ X SP ) = (28,000 X $5.00) - (27,000 X $5.00) = $140,000 - $135,000 = $5,000 U (b) Total materials variance: = ( AQ X AP ) - ( SQ X SP ) = (26,200 X $5.20) - (27,000 X $5.00) = $136,240 - $135,000 = $1,240 U Materials price variance: = ( AQ X AP ) - ( AQ X SP ) = (26,200 X $5.20) - (26,200 X $5.00) = $136,240 - $131,000 = $5,240 U Materials quantity variance: = ( AQ X SP ) - ( SQ X SP ) = (26,200 X $5.00) - (27,000 X $5.00) = $131,000 - $135,000 = $4,000 F Kendras Company standard labor cost of producing one unit of Product DD is 4 hours at the of rate $12.00 per hour. During August, 40,800 hours of labor are incurred at a cost of $12.10 per hour to produce 10,000 units of Product DD. (a)compute the total labor variance (b)compute the labor price and quantity variances. (c)repeat (b), assuming the standard is 4.2 hours of direct labor at $12.25 per hour. (a) Total labor variance: = ( AH X AR ) - ( SH X SR ) = (40,800 X $12.10) - (40,000* X $12.00) = $493,680 - $480,000 = $13,680 U *10,000 X 4 (b) Labor price variance: = ( AH X AR ) - ( AH X SR ) = (40,800 X $12.10) - (40,800 X $12.00) = $493,680 - $489,600 = $4,080 U Labor quantity variance: = ( AH X SR ) - ( SH X SR ) = (40,800 X $12.00) - (40,000 X $12.00) = $489,600 - $480,000 = $9,600 U (c) Labor price variance: = ( AH X AR ) - ( AH X SR ) = (40,800 X $12.10) - (40,800 X $12.25) = $493,680 - $499,800 = $6,120 F Labor quantity variance: = ( AH X SR ) - ( SH X SR ) = (40,800 X $12.25) - (42,000 X $12.25) = $499,800 - $514,500 = $14,700 F Winters Company uses a standard cost accounting system. During January, the company reported the following manufacturing variances. Materials price variance $1,250U; Materials quantity variance $700F; Labor price variance $525U; Labor quantity variance $725U; overhead variance $800U. In addition, 8,000 units of product were sold at $8.00 per unit. Each unit sold had a standard cost of $6.00. Selling and administrative expenses were $6,000 for the month. Prepare an income statement for management for the month ended January 31, 2011. WINTERS COMPANY Income Statement For the Month Ended January 31, 2011 Sales (8,000 X $8)...................................................................... Cost of goods sold (8,000 X $6) ........................................... Gross profit (at standard)....................................................... Variances Materials price................................................................... $1,250 Materials quantity............................................................. (700) Labor price ......................................................................... 525 Labor quantity ................................................................... 725 Overhead............................................................................. 800 Total varianceunfavorable ............................... Gross profit (actual) ................................................................. Selling and administrative expenses ................................. Net income .................................................................................. $64,000 48,000 16,000 2,600 13,400 6,000 $ 7,400
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