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

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Accounting 102 Session 19
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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) 0.84 0.60 18.00/hr. 2 min. Baking $0.24 14.40/hr. 1 min. Mixing Direct manufacturing labor 1.45 0.50 0.50/oz. 1oz. Almonds 0.75 0.15/oz. 5oz. Milk chocolate $0.20 $0.02/oz. 10oz. Cookie mix Direct materials Total Standard Cost Standard Unit Costs Quantity Cost Item
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18.00 / hr 14.40 / hr .50 / oz .20 / oz .02 / oz AP Actual Cost/unit Input Usage Report, May, 2009 AO × AI × AP AO × AI 240,000 800,000 min Baking 108,000 450,000 min Mixing Direct manufacturing labor 240,000 480,000 oz. Almonds 532,000 2,660,000 oz. Milk chocolate $93,000 4,650,000 oz. Cookie mix Direct materials Actual Costs Quantity Cost Item Performance Report, May, 2009: 50,000 F 400,000 450,000 Units (in pounds) Variance Budget Actual The information presented below relates to cookie production for May, 2009.
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Derive the variances for direct materials and direct manufacturing labor costs for May, 2009.
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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. 450 lbs 450 lbs 400 lbs Output 240.0 108.0 240.0 532.0 93.0 Actual Results (000) 270.0 450 x .60 = 240.0 400 x .60 = Baking 108.0 450 x .24 = 96.0 400 x .24 = Mixing Direct Labor 225.0 450 x .50 = 200.0 400 x .50 = Almonds 337.5 450 x .75 = 300.0 400 x .75 = Chocolate 90.0 450 x .20 = 80.0 400 x .20 = Mix Direct Materials Flexible Budget (000) Static Budget (000)
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Now let’s derive the variances: 1) Static Budget Variances: 50 F 400 450 Output 0.0 12.0 U 40.0 U 232.0 U 13.0 U Static Budget Variance 240.0 240.0 Baking 96.0 108.0 Mixing Direct Labor 200.0 240.0 Almonds 300.0 532.0 Chocolate 80.0 93.0 Mix Direct Materials = Static Budget Actual Results
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2a) Volume Variances = (Expected Output – Actual Output) x Standard Cost/Unit = 50 F 450 lbs 400 lbs Output 30.0 U 12.0 U 25.0 U
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Session 19 - Accounting 102 Session 19 Example: (Similar to...

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