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Unformatted text preview: 1 Demonstration Problem: Chapter 9 Standard Costing S9.1 Ace Company produces components for truck motors and uses a standard cost system for product costing and control purposes. The standard cost sheet for manufacturing a widely used line of piston rods shows a standard cost of $40.00 per piston rod with the following standard cost card. Direct materials (4 lbs @ $3.40) $13.60 Direct Labor (0.8 hours @ $20 per hour) $16.00 Variable Overhead (0.8 hours @ $5 per hour) 4.00 Fixed Overhead (0.8 hours @$ 8 per hour) 6.40 Total standard unit cost $40.00 During the year Ace produced 70,000 piston rods and its accounting records show the following results: 1. Purchased 300,000 pounds of direct materials at an average cost of $3.20 per pound. 2. There were 10,000 pounds of direct materials in beginning inventory carried on the books at the standard cost of $3.40 per pound. 3. 306,000 pounds of direct materials were used in production. 4. 60,000 hours of direct labor were used in production at a cost of $1,176,425 5. Actual manufacturing overhead costs for the year were $642,500. These costs were analyzed into $425,000 of fixed overhead and $217,500 of variable overhead. Normal activity for this production line is 65,000 piston rods per year. Standard overhead rates are computed based on normal activity based on standard direct labor hours....
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This note was uploaded on 11/09/2011 for the course ACCT 3337 taught by Professor Staff during the Fall '08 term at University of Houston.
- Fall '08