# Session 19 - Accounting 102 Session 19 Example(Similar to...

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Accounting 102Session 19
Example: (Similar to Problem 7-41)Aunt Molly’s Old Fashioned Cookies bakes cookies for retail stores. The company’s best selling cookie is marketed as a gourmet cookie and regularly sells for \$8 per pound. The standard cost per pound, based on normal monthly production of 400,000 pounds is given below:SI×SP (\$/lb)SP (\$/unit of input)SI (units of input/lb)0.840.6018.00/hr.2 min.Baking\$0.2414.40/hr.1 min.MixingDirect manufacturing labor1.450.500.50/oz.1oz.Almonds0.750.15/oz.5oz.Milk chocolate\$0.20\$0.02/oz.10oz.Cookie mixDirect materialsTotal Standard CostStandardUnit CostsQuantityCost Item
18.00 / hr14.40 / hr.50 / oz.20 / oz.02 / ozAPActual Cost/unitInput Usage Report, May, 2009AO×AI×APAO×AI240,000800,000 minBaking108,000450,000 minMixingDirect manufacturing labor240,000480,000 oz.Almonds532,0002,660,000 oz.Milk chocolate\$93,0004,650,000 oz.Cookie mixDirect materialsActual CostsQuantityCost ItemPerformance Report, May, 2009:50,000 F400,000450,000Units (in pounds)VarianceBudgetActualThe information presented below relates to cookie production for May, 2009.
Derive the variances for direct materials and direct manufacturing labor costs for May, 2009.
First, let’s derive the static and the flexible production cost budgets for direct materials and direct labor and compare them with the actual costs incurred.
Now let’s derive the variances:1) Static Budget Variances:50 F400450Output0.012.0 U40.0 U232.0 U13.0 UStatic BudgetVariance240.0240.0Baking96.0108.0MixingDirect Labor200.0240.0Almonds300.0532.0Chocolate80.093.0MixDirect Materials=Static BudgetActual Results
2a) Volume Variances = (Expected Output – Actual Output) x Standard Cost/Unit=50 F450 lbs400 lbsOutput30.0 U12.0 U25.0 U37.5 U10.0 UVolume Variance270.0240.0Baking108.096.0MixingDirect Labor225.0200.0Almonds337.5300.0Chocolate90.080.0MixDirect MaterialsFlexible BudgetStatic Budget