c10-ex.doc - Exercise 10-1 Direct Materials...

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Unformatted text preview: Exercise 10-1 Direct Materials Variances [L010-1] Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company's products, a football helmet for the North American market, requires a special plastic. During the quarter ending June 30, the company manufactured 35,000 helmets, using 22,500 kilograms of plastic. The plastic cost the company $171,000. According to the standard cost card, each helmet should require 0.6 kilograms of plastic, at a cost of $8 per kilogram. Required: 1. According to the standards, what cost for plastic should have been incurred to make 35,000 helmets? How much greater or less is this than the cost that was incurred? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect {i.e., zero variance). Round Standard kilograms of plastic per helmet to 1 decimal place.) Number of helmets 35,000 Standard kilograms of plastic per helmet 0.6 Total standard kilograms allowed 21,000 Standard cost per kilogram $ 8 Total standard cost $ 168,000 Actual cost incurred $ 171 ,000 Total standard cost 168,000 Total material variance $ 3,000 Unfavorable ‘—» 2. Break down the difference computed in (1) above into a materials price variance and a materials quantity variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Materials price variance $ 9,000 F Materials quantity variance $ 12,000 U Exercise 10-2 Direct Labor Variances [L010-2] SkyChefs, lnc., prepares in-flight meals for a number of major airlines. One of the company’s products is grilled salmon in dill sauce with baby new potatoes and spring vegetables. During the most recent week, the company prepared 4,000 of these meals using 960 direct labor-hours. The company paid these direct labor workers a total of $9,600 for this work, or $10.00 per hour. According to the standard oost card for this meal, it should require 0.25 direct labor-hours at a cost of $9.75 per hour. Required: 1. According to the standards, what direct labor cost should have been incurred to prepare 4,000 meals? How much does this differ from the actual direct labor cost? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and “None" for no effect (i.e., zero variance). Round labor-hours per meal and labor cost per hour to 2 decimal places.) —: Number of meals prepared 4,000 Standard direct labor-hours per meal 0.25 Total direct labor-hours allowed 1,000 Standard direct labor cost per hour $ 9.75 Total standard direct labor cost $ 9,750 Actual cost incurred $ 9,600 Total standard direct labor cost 9,750 Total direct labor variance $ 150 Favorable I 2. Break down the difference computed in (1) above into a labor rate variance and a labor efficiency variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect [i.e., zero variance).) Labor rate variance Labor efficiency variance $ 390 F . Exercise 10-3 Variable Overhead Variances [LO10-3] Logistics Solutions provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor- hours. In the most recent month, 120,000 items were shipped to customers using 2,300 direct labor-hours. The company incurred a total of $7,360 in variable overhead costs. According to the company's standards, 0.02 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.25 per direct labor-hour. Required: 1. According to the standards, what variable overhead cost should have been incurred to fill the orders for the 120,000 items? How much does this differ from the actual variable overhead cost? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round labor-hours per item and overhead cost per hour to 2 decimal places.) —: Number of items shipped 120,000 Standard direct labor-hours per item 0.02 Total direct labor-hours allowed 2,400 Standard variable overhead cost per hour $ 3.25 Total standard variable overhead cost $ 7,800 Actual variable overhead cost incurred $ 7,360 Total standard variable overhead cost 7,800 Total variable overhead variance $ 440 Favorable I 2. Break down the difference computed in (1) above into a variable overhead rate variance and a variable overhead efficiency variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance}.) Variable overhead rate variance $ 115 F Variable overhead efficiency variance $ 325 F Exercise 10-5 Working Backwards from Labor Variances [L010-2] The auto repair shop of Quality Motor Company uses standards to control the labor time and labor cost in the shop. The standard labor cost for a motor tune-up is given below: Job Standard Hours Standard Rate Standard Cost Motor tune-up 2.5 $9.00 $22.50 The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 50 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups: Labor rate variance $8? F Labor spending variance $93 U Required: 1. Determine the number of actual labor-hours spent on tune-ups during the week. — w 2. Determine the actual hourly rate of pay for tune-ups last week. (Round your answer to 2 decimal places.) h Foundational [LO10—1, L010—2, L010-3] [ The foiioMng information appiies to the questions dispiayed beionc] Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor—hours and its standard cost card per unit is as follows: Direct materials: 5 pounds at $8.00 per pound $40.00 Direct labor: 2 hours at $14 per hour 28.00 Variable overhead: 2 hours at $5 per hour 10.00 Total standard cost per unit $ 78.00 The planning budget for March was based on producing and selling 25,000 units. However, during March the company actually produced and sold 30,000 units and incurred the following costs: a. Purchased 160,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production. b. Direct laborers worked 55,000 hours at a rate of $15.00 per hour. c. Total variable manufacturing overhead for the month was $280,500. Foundational 10—1 1. What raw materials cost would be included in the company’s planning budget for March? ‘3 1,000,000 Foundational 10—2 2. What raw materials cost would be included in the company’s flexible budget for March? $ 1,200,000 Foundational 10-3 3. What is the materials price variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect {i.e., zero variance.).) Foundational 10-4 4. What is the materials quantity variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and “None" for no effect (i.e., zero variance.).) Foundational 10-5 5. If Preble had purchased 170,000 pounds of materials at $7.50 per pound and used 160,000 pounds in production, what would be the materials price variance for March? {Indicate the effect of each variance by selecting "F" for favorable, “U" for unfavorable, and "None" for no effect (i.e., zero vafianceJJ Foundational 10-6 6. If Preble had purchased 170,000 pounds of materials at $7.50 per pound and used 160,000 pounds in production, what would be the materials quantity variance for March? {Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).) mt]! Foundational 10—7 '1'. What direct labor cost would be included in the company’s planning budget for March? $ 700,000 Foundational 10—8 8. What direct labor cost would be included in the company's flexible budget for March? $ 840,000 Foundational 10—9 9. What is the labor rate variance for March? {Indicate the effect of each variance by selecting “F" for favorable, "U" for unfavorable, and “None" for no effect (i.e., zero variance.}.) fl”! Foundational 10—10 10.What is the labor efficiency variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect {i.e., zero variance.).) Foundational 10-11 11 .What is the labor spending variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect {i.e., zero variance.).) Foundational 10-12 12.What variable manufacturing overhead cost would be included in the company’s planning budget for March? $ 250,000 Foundational 10-13 13.What variable manufacturing overhead cost would be included in the company’s flexible budget for March? $ 300,000 Foundational 10-14 14.What is the variable overhead rate variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.” Foundational 10-15 15.What is the variable overhead efficiency variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.) Do not round intermediate calculations.) —$ I Problem 10-9 Comprehensive Variance Analysis [LO10-1, LO10—2, LO10-3] Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 2,850 hours each month to produce 1,900 sets of covers. The standard costs associated with this level of production are: Per Set Total of Covers Direct materials $ 42,560 $22.40 Direct labor $ 17,100 9.00 Variable manufacturing overhead (based on direct labor-hours) $ 6,840 3.60 $35.00 During August, the factory worked only 2,800 direct labor-hours and produced 2,000 sets of covers. The following actual costs were recorded during the month: Per Set Total of Covers Direct materials (12,000 yards) $ 45,600 $22.80 Direct labor $ 18,200 9.10 Variable manufacturing overhead $ 7,000 3.50 $35.40 At standard, each set of covers should require 5.6 yards of material. All of the materials purchased during the month were used in production. Required: 1. Compute the materials price and quantity variances for August. [Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your intermediate calculations to 2 decimal places. Round "Standard Price" and "Actual Price" answers to 2 decimal places.) Actual Quantity x Actual Price — Standard Price = Variance Materials price variance 12,000 3.30 4.00 2,400 F Standard Price x Actual Quantity — Standard Quantity = Variance Materials quantity variance 4.00 12,000 11,200 3,200 U I 2. Compute the labor rate and efficiency variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your intermediate calculations to 2 decimal places. Round "Standard Rate" and "Actual Rate" answers to 2 decimal places.) Actual Hours x Actual Rate — Standard Rate = Variance Labor rate variance 2,800 6.50 6.00 1,400 U Standard Rate Ix Actual Hours — Standard Hours = Variance Labor efficiency variance 6.00 2,800 3,000 1,200 F 3. Compute the variable overhead rate and efficiency variances for August. [Indicate the effect of each variance by selecting "F" for favorable. “U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your intermediate calculations to 2 decimal places. Round "Standard Rate" and "Actual Rate" answers to 2 decimal places.) Standard Rate Variance Actual Hours x Actual Rate — = Variable overhead rate variance 2,800 2.50 2.40 280 U Standard Rate x Actual Hours — Standard Hours = Variance Variable overhead efficiency variance 2.40 2,800 3,000 480 F Exercise 10A-3 Applying Overhead in a Standard Costing System [L010-4] Privack Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below: Variable overhead cost per direct labor-hour $2.00 Total fixed overhead cost per year $250,000 Budgeted standard direct labor-hours (denominator level of activity} 40,000 Actual direct labor-hours 39,000 Standard direct labor-hours allowed for the actual output 38,000 Required: 1. Compute the predetermined overhead rate for the year. {Round Predetermined overhead rate to 2 decimal places.) Total fixed overhead cost per year $ 250,00W Total variable overhead cost 80,00W Total overhead cost at the denominator level of activity $ 330,000 Budgeted standard direct labor—hours 40,00W DLHs Predetermined overhead rate 55 8.25 per DLH 2. Determine the amount of overhead that would be applied to the output of the period. (Round Predetermined overhead rate to 2 decimal places.) Standard direct labor-hours allowed for the actual output 38,00W DLHs Predetermined overhead rate $ 8.25J per DLH Overhead applied $ 313,500 } Exercise 10B—1 Recording Variances in the General Ledger [LO10-5] Bliny Corporation makes a product with the following standard costs for direct material and direct labor: Direct material: 2.00 meters at $3.25 per meter $ 6.50 Direct labor: 0.40 hours at $12.00 per hour $ 4.80 During the most recent month, 5,000 units were produced. The costs associated with the month’s production of this product were as follows: Material purchased: 12,000 meters at $3.15 per meter $ 37,800 Material used in production: 10,500 meters — Direct labor: 1,975 hours at $12.20 per hour $ 24,095 The standard cost variances for direct material and direct labor are: Materials price variance: 12,000 meters at $0.10 per meter F $1,200 F Materials quantity variance: 500 meters at $3.25 per meter U $1,625 U Labor rate variance: 1,9?5 hours at $0.20 per hour U $ 395 U Labor efficiency variance: 25 hours at $12.00 per hour F $ 300 F ? Required: 1. Prepare the journal entry to record the purchase of materials on account for the month. (If no entry is required for a transactionfevent, select "No journal entry required" in the first account field.) view transaction list journal entry worksheet Raw materials Materials price variance 1,200 Accounts payable 2. Prepare the journal entry to record the use of materials for the month. (If no entry is required for a transactionlevent, select "No journal entry required" in the first account field.) view transaction list journal entry worksheet 1 Work in process 32,500 Materials quantity variance 1,625 Raw materials 34,125 u;- 3. Prepare the journal entry to record the incurrence of direct labor cost for the month. (If no entry is required for a transactiom‘event, select "No journal entry required" in the first account field.) view transaction list l journal entry worksheet 1 Work in process 24,000 Labor rate variance 395 Labor efficiency variance 300 Wages payable 24.095 ...
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