Lecture 7 Tutorial Questions.pdf - ACCT7107 Lecture 7...

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ACCT7107 Lecture 7 Tutorial Questions 8-34 Flexible-budget variances, review of Chapters 7 and 8. Michael Roberts is a cost accountant and business analyst for Darby Design Company (DDC), which manufactures expensive brass doorknobs. DDC uses two direct cost categories: direct materials and direct manufacturing labor. Roberts feels that manufacturing overhead is most closely related to material usage. Therefore, DDC allocates manufacturing overhead to production based upon pounds of materials used. At the beginning of 2017, DDC budgeted annual production of 410,000 doorknobs and adopted the following standards for each doorknob: Input Cost/Doorknob Direct materials (brass) 0.3 lb. @$9/lb. $ 2.70 Direct manufacturing labor 1.2 hours @$16/hour 19.20 Manufacturing overhead: Variable $4/lb. 0.3 lb. 1.20 Fixed $14/lb. 0.3 lb. 4.20 Standard cost per doorknob $27.30 Actual results for April 2017 were as follows: Production 32,000 doorknobs Direct materials purchased 12,900 lb. at $10/lb. Direct materials used 9,000 lbs. Direct manufacturing labor 29,600 hours for $621,600 Variable manufacturing overhead $ 64,900 Fixed manufacturing overhead $160,000 Required: 1. For the month of April, compute the following variances, indicating whether each is favorable (F) or unfavorable (U): a. Direct materials price variance (based on purchases) b. Direct materials efficiency variance c. Direct manufacturing labor price variance d. Direct manufacturing labor efficiency variance e. Variable manufacturing overhead spending variance f. Variable manufacturing overhead efficiency variance g. Production-volume variance h. Fixed manufacturing overhead spending variance 2. Can Roberts use any of the variances to help explain any of the other variances? Give examples.
8-35 Comprehensive variance analysis. Chef Whiz manufactures premium food processors. The following are some manufacturing overhead data for Chef Whiz for the year ended December 31, 2017: Manufacturing Overhead Actual Results Flexible Budget Allocated Amount Variable $51,480 $79,950 $79,950 Fixed 350,210 343,980 380,250 Budgeted number of output units: 588 Planned allocation rate: 3 machine-hours per unit Actual number of machine-hours used: 1,170 Static-budget variable manufacturing overhead costs: $72,324 Required: Compute the following quantities (you should be able to do so in the prescribed order): 1. Budgeted number of machine-hours planned 2. Budgeted fixed manufacturing overhead costs per machine-hour 3. Budgeted variable manufacturing overhead costs per machine-hour 4. Budgeted number of machine-hours allowed for actual output produced 5. Actual number of output units 6. Actual number of machine-hours used per output unit 8-36 Journal entries (continuation of 8-35). Required: 1.

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