Solutions to Exam 2 Study Problems - 6-20 1(30 min Revenues and production budget 12-ounce bottles 4-gallon units a b Selling Price \$0.25 1.50 Units

Solutions to Exam 2 Study Problems - 6-20 1(30 min Revenues...

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6-20(30 min.) Revenues and production budget. 1. Selling Price Units Sold Total Revenues 12-ounce bottles \$0.25 4,800,000a\$1,200,000 4-gallon units 1.50 1,200,000b1,800,000\$3,000,000a400,000 × 12 months = 4,800,000 b100,000 × 12 months = 1,200,000 2. Budgeted unit sales (12-ounce bottles) 4,800,000 Add target ending finished goods inventory 600,000Total requirements 5,400,000 Deduct beginning finished goods inventory 900,000Units to be produced 4,500,0003.BeginningBudgetedTargetBudgeted= + inventorysalesending inventoryproduction= 1,200,000 + 200,000 1,300,000 = 100,000 4-gallon units
7-25 (30 min.) Price and efficiency variances, journal entries. 1. Direct materials and direct manufacturing labor are analyzed in turn: Actual Costs Incurred (Actual Input Qty. × Actual Price) Actual Input Qty. × Budgeted Price Flexible Budget (Budgeted Input Qty. Allowed for Actual Output × Budgeted Price) Direct Materials (100,000 ×\$3.10a) \$310,000 Purchases Usage (100,000 ×\$3.00) (98,073 ×\$3.00) \$300,000 \$294,219 (9,810 ×10 ×\$3.00) \$294,300 \$10,000 U \$81 F Price variance Efficiency variance Direct Manufacturing Labor (4,900 ×\$21b) \$102,900 (4,900 ×\$20) \$98,000 (9,810 ×0.5 ×\$20) or (4,905 ×\$20) \$98,100 \$4,900 U \$100 F Price variance Efficiency variance a\$310,000 ÷ 100,000 = \$3.10b\$102,900 ÷ 4,900 = \$21 2. Direct Materials Control 300,000 Direct Materials Price Variance 10,000 Accounts Payable or Cash Control 310,000 Work-in-Process Control 294,300 Direct Materials Control 294,219 Direct Materials Efficiency Variance 81 Work-in-Process Control 98,100 Direct Manuf. Labor Price Variance 4,900 Wages Payable Control 102,900 Direct Manuf. Labor Efficiency Variance 100 3. Some students’ comments will be immersed in conjecture about higher prices for materials, better quality materials, higher grade labor, better efficiency in use of materials, and so forth. A possibility is that approximately the same labor force, paid somewhat more, is taking slightly less time with better materials and causing less waste and spoilage. A key point in this problem is that all of these efficiency variances are likely to be insignificant. They are so small as to be nearly meaningless. Fluctuations about standards are bound to occur in a random fashion. Practically, from a control viewpoint, a standard is a band or range of acceptable performance rather than a single-figure measure. 4.The purchasing point is where responsibility for price variances is found most often. The production point is where responsibility for efficiency variances is found most often. Chemical, Inc., may calculate variances at different points in time to tie in with these different responsibility areas.
7-26 (20 min.)Continuous improvement (continuation of 7-25). 1. Standard quantity input amounts per output unit are: Direct Materials (pounds) Direct Manufacturing Labor (hours) January February (Jan. × 0.997) March (Feb. × 0.997)10.0000 9.9700 9.9401 0.5000 0.4985 0.4970 2. The answer to requirement 1 of Question 7-25 is identical except for the flexible- budget amount. Actual Costs Incurred (Actual Input Qty. ×Actual Price) Actual Input Qty. ×Budgeted Price Flexible Budget (Budgeted Input Qty. Allowed for Actual Output ×Budgeted Price) Direct Materials (100,000 × \$3.10a) \$310,000 Purchases Usage (100,000 × \$3.00) (98,073 × \$3.00)\$300,000 \$294,219 (9,810 × 9.940 × \$3.00) \$292,534 \$10,000 U \$1,685 U Price variance Efficiency varianceDirect Manuf.