E10-29A - Student Mukhtar Lakha Instructor Robert Nicholson Assignment Acct 2302 Chapter 10 Date Course Acct2302-7502-Robert Time 8:59 PM

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 6
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 8
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Student: Mukhtar Lakha Instructor: Robert Nicholson Assignment: Acct 2302 Chapter 10 Date: 11/20/11 Course: Acct2302-7502-Robert Time: 8:59 PM Nicholson-Fa112011 Book: Braun: Managerial Accounting, 2e 1_ During the week, Eddie's french fry manufacturing facility purchased 10,000 pounds of potatoes at a price of $1.15 per pound. The standard price per pound is $1.03. During the week, 9,260 pounds of potatoes were used. The standard quantity of potatoes that should have been used for the actual volume of output was 9,100 pounds. Record the following transactions using a standard cost accounting system: 1. The purchase of potatoes 2. The use of potatoes Are the variances favorable or unfavorable? Explain. 1. Let's record the journal entry for the purchase of potatoes. (Round all amounts to the nearest dollar. Record debits first, then credits. Explanations are not required.) Journal Entry Date Accounts Debit Credit Raw Material Inventory 10,300 Direct Materials Price Variance 1,200 Accounts Payable 11,500 2. Let's record the journal entry for the use of the potatoes. (Round all amounts to the nearest dollar.) Journal Entry Date Accounts Debit Credit Work in Process Inventory 9,373 Direct Materials Efficiency Variance 165 Raw Material Inventory 9,538 Are the variances favorable or unfavorable? Explain. Both the direct materials price variance and the direct materials efficiency variance are unfavorable . We can tell this because the variance accounts were debited . Also, we can see that Eddie's paid more per pound than the standard cost. They also used more pounds of potatoes than the standard allowed for the actual production volume. Page 1 Student: Mukhtar Lakha Instructor: Robert Nicholson Assignment: Acct 2302 Chapter 10 Date: 11/20/11 Course: Acct2302-7502-Robert Time: 8:59 PM Nicholson-Fa112011 Book: Braun: Managerial Accounting, 2e 2_ During the week, Carver's french fry manufacturing facility incurred 1,800 hours of direct labor. Direct laborers were paid $12.35 per hour. The standard hourly labor rate is $11.95. Standards indicate that for the volume of output actually achieved, the factory should have used 2,100 hours. Record the following transactions using a standard cost accounting system: 1. The accumulation of labor costs 2. The assignment of direct labor to production Are the variances favorable or unfavorable? Explain. 1. Let's record the journal entry for the accumulation of labor costs. (Record debits first, then credits. Explanations are not required.) Journal Entry Date Accounts Debit Credit Manufacturing Wages 21,510 Direct Labor Price Variance 720 Wages Payable 22,230 2. Let's record the journal entry for the assignment of direct labor to production. Journal Entry Date Accounts Debit Credit Work in Process Inventory 25,095 Direct Labor Efficiency Variance 3,585 Manufacturing Wages 21,510 Are the variances favorable or unfavorable? Explain. The price variance is unfavorable . We can tell this in two ways: 1) Carver's had to pay more per hour than the standard rate and 2) the variance account is debited The efficiency variance is favorable . We can tell this in two ways: 1) Workers spent fewer hours than the standard number of hours allowed for the actual production level and 2) the variance account is credited . Page 2 Student: Mukhtar Lakha Instructor: Robert Nicholson Assignment: Acct 2302 Chapter 10 Date: 11/20/11 Course: Acct2302-7502-Robert Time: 8:59 PM Nicholson-Fa112011 Book: Braun: Managerial Accounting, 2e 3_ Time 2 Chill installed eleven pools during May. Prepare an income statement performance report for Time 2 Chill table below as a guide. ' (Click the icon to view the table.) Assume that the actual sales price per pool is $13,800, actual variable expenses total $63,500, and actual fixed e $19,300 in May. The master budget was prepared with the following assumptions: variable cost of $8,100 per p01 $20,000 per month; anticipated sales volume of ten pools at $13,800 per pool. Requirement 1. Compute the sales volume variance and flexible budget variance. Use these variances to explain to Time 2 why May's operating income differs from operating income shown in the static budget. Prepare an income statement report for Time 2 Chill for May. (For accounts with a 0 balance, make sure to enter appropriate column. Label each variance as favorable (F) or unfavorable (U). If the variance is zero, do not select Time 2 Chill Pools Income Statement Performance Report Month Ended May 31 Flexible Budget for Actual Results at Flexible Budget Actual Number of Sales Volume Static Actual Prices Variance Output Units Variance B Output units :1 |=l Sales revenue Q ED ; ED Variable expenses : |:| Cl : E E Fixed expenses |=l Total expenses ; l;l Q I: ED Operating income E |;lF Use the sales volume variance and flexible budget variance to explain to Time 2 Chill's management why May's ( income differs from operating income shown in the static budget. WWW Time 2 Chill's actual operating income was $|:| the static budget. There are two primary reasons: 1. Time 2 Chill actually installed pool than expected. This operating income by $lj. 2. Time 2 Chill's actual expenses to install 11 pools were $|:| than they should have been to install 11 pc flexible budget variance means that Time 2 Chill did a job controlling cost. Data Table Page 3 Student: Mukhtar Lakha Date: 11/20/11 Instructor: Robert Nicholson Assignment: Acct 2302 Chapter 10 Course: Acct2302-7502-Robert Time: 8:59 PM Nicholson-Fa112011 Book: Braun: Managerial Accounting, 2e 3. Time 2 Chill Pools (cont) Income Statement Performance Report Month Ended June 30 (1) (2) (3) (4) (5) (1)—(3) Flexible (3)-(5) Actual Budget Results Flexible for Actual Sales Static at Actual Budget Number of Volume (Master) Prices Variance Output Units* Variance Budget* Output units (pools installed) 10 -O- 10 2 F 8 Sales revenue $121,000 $1,000 F $120,000 $24,000 F $96,000 Variable expenses 83,000 3,000 U 80,000 16,000 F 64,000 Fixed expenses 22,000 2,000 U 20,000 -0- 20,000 Total expenses 105,000 5,000 U 100,000 16,000 U 84,000 Operating income $ 16,000 $4,000 U $ 20,000 $ 8,000 F $12,000 k —)K— .—1 Flexible budget variance, Sales volume variance, $4,000 U $8,000 F Static budget variance, $4,000 F * Budgeted sale price is $12,000 per pool, budgeted variable expense is $8,000 per pool, and budgeted total monthly fixed expenses are $20,000. Page 4 Student: Mukhtar Lakha Instructor: Robert Nicholson Assignment: Acct 2302 Chapter 10 Date: 11/20/11 Course: Acct2302-7502-Robert Time: 8:59 PM Nicholson-Fa112011 Book: Braun: Managerial Accounting, 2e 4_ Premium Guard, which uses a standard cost accounting system, manufactured 230,000 boat fenders during the year, using 1,940,000 feet of extruded vinyl purchased at $1.15 per foot. Production required 4,500 direct labor hours that cost $12.50 per hour. The materials standard was 8 feet of vinyl per fender at a standard cost of $1.20 per foot. The labor standard was 0.023 direct labor hour per fender at a standard cost of $11.50 per hour. Compute the price and efficiency variances for direct materials and direct labor. Does the pattern of variances suggest Premium Guard's managers have been making trade-offs? Explain. Begin by determining the formula for the price variance, then compute the price variances for direct materials (Dlt labor (DL). (Enter the results as positive numbers. Label each variance as favorable (F) or unfavorable (U).) ( Actual price per input unit — Standard price per inputunit )x Actual quantity ofinput = DM ( $ 1.15 — 1.20 )x 1,940,000 = $ DL ( $ 12.50 — 11.50 )x 4,500 = $ Next determine the formula for the efficiency variance, then compute the efficiency variances for direct materials 1 labor (DL). (Enter the results as positive numbers. Label each variance as favorable (F) or unfavorable (U).) ( Actual quantityofinput - Standard quantity ofinput )x Standard price per input unit = Efi DM ( 1,940,000 - 1,840,000 )x $ 1.20 = $ DL ( 4,500 — 5,290 )X $ 11.50 = $ The favorable direct materials price variance combined with the unfavorable direct materials efficiency vari that managers may have used lower-quality materials. The net effect is unfavorable . The unfavorable direct labor price variance combined with the favorable direct labor efficiency variance sus managers may have used higher-paid workers who performed more efficiently. The net effect is favorable Page 5 Student: Mukhtar Lakha Instructor: Robert Nicholson Assignment: Acct 2302 Chapter 10 Date: 11/20/11 Course: Acct2302-7502-Robert Time: 8:59 PM Nicholson-Fa112011 Book: Braun: Managerial Accounting, 2e 5_ Perfect - Cut processes bags of organic frozen vegetables sold at specialty grocery stores. Perfect - Cut allocates manufacturing overhead based on direct labor hours. Perfect - Cut has projected total overhead for the year to be $812,500. Of this amount, $650,000 relates to fixed overhead expenses. Perfect - Cut expects to process 162,500 cases of frozen organic vegetables this year. The direct labor standard for each case is 1 / 4 of an hour. Requirements 1. Compute the standard variable overhead rate. 2. Compute the fixed overhead rate. 3. Compute the standard total overhead rate. Requirement 1. Begin by determining the formula, then compute the standard variable overhead rate. Variable overhead / Standard direct labor (hrs) = Standard variable overhead r... $ 162,500 / 40,625 = $ 4 Requirement 2. Begin by determining the formula, then compute the fixed overhead rate. Fixed overhead / Standard direct labor (hrs) = Standard fixed overhead rate $ 650,000 / 40,625 = $ 16 Requirement 3. Compute the standard total overhead rate. The standard total overhead rate is $ 20 . Page 6 Student: Mukhtar Lakha Instructor: Robert Nicholson Assignment: Acct 2302 Chapter 10 Date: 11/20/11 Course: Acct2302-7502-Robert Time: 8:59 PM Nicholson-Fa112011 Book: Braun: Managerial Accounting, 2e 6_ Nice - Cut processes bags of organic frozen vegetables sold at specialty grocery stores. Nice - Cut allocates manufacturing overhead based on direct labor hours. Nice - Cut actually processed 177,500 cases of frozen organic vegetables during the year and incurred $832,500 of manufacturing overhead. Of this amount, $660,000 was fixed. 7; (Click the icon to view the additional data.) Requirements 1.What is the flexible budget (for the actual output) for variable overhead? for fixed overhead? for total overhead? 2.How much overhead would have been allocated to production? 3.Use your answer from Requirement 1 to determine the overhead flexible budget variance. What does this tell managers? 4.Use your answer from Requirements 1 and 2 to determine the production volume variance. What does this tell managers? 5.What is the total overhead variance? Requirement 1. Calculate these amounts for the flexible budget (for the actual output): the variable overhead, th< overhead and the total overhead. Nice-Cut Flexible Budget for Actual Outputs Variable manufacturing overhead $ 177,500 V Fixed manufacturing overhead 650,000 Total manufacturing overhead $ 827,500 V Requirement 2. Determine the formula used to calculate the overhead allocated, then calculate how much overh been allocated to production. (Enter amounts to two decimal places.) Over $ Actual cases processed x Direct labor standard x Standard total overhead rate 177,500 x 0.25 x $ 20 Requirement 3. Complete the formula to find the overhead flexible budget variance, then use your answer from I to determine the amount. (Enter the results as positive numbers. Label each variance as favorable (F) or unfavor: Actual overhead cost — Flexible budget overhead—actual outputs = Overhead flexible bl $ 832,500 — 827,500 = $ 5,000 This variance tells managers that Nice — Cut actually incurred $ 5000 more for manufacturing overhead than ti expected for the actual volume produced during the year. Requirement 4. Determine the formula, then use your answers from Requirements 1 and 2 to determine the pr01 variance. (Enter the results as positive numbers. Label each variance as favorable (F) or unfavorable (U).) Flexible budget overhead—actual outputs — Standard overhead allocated to production = Production volw V $ 827,500 — 887,500 = $ 60,000 V This variance tells managers that $ 60,000‘ of the total overhead variance arose because Nice - Cut produ cases of vegetables than originally expected. It is favorable , because Nice — Cut used its plant capacity m0l than originally anticipated. Page 7 Student: Mukhtar Lakha Date: 11/20/11 Time: 8:59 PM 6. (cont) Nicholson-Fall 201 1 Instructor: Robert Nicholson Course: Acct2302-7502-Robert Book: Braun: Managerial Accounting, 2e Assignment: Acct 2302 Chapter 10 Requirement 5. Complete the formula, then calculate the total overhead variance. (Enter the results as positive r each variance as favorable (F) or unfavorable (U).) V V Actual overhead cost — Standard overhead allocated to production = Total overhead v $ 832,500 ‘ — $ 887,500 ‘ = $ 55,000 Data Table Standard variable overhead rate $4 Standard fixed overhead rate $16 Standard total overhead rate $20 Amount of cases processed 162,500 Standard fixed overhead $650,000 Direct labor standard for each case 0.25 hr Nice-Cut Flexible Budget for Actual Outputs Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing overhead YOU ANSWERED: 827500 2000 fixed less less Standard overhead allocated to producti... 15 Page 8 44375 650000 694375 3550000 Standard total overhead rate nothing ...
View Full Document

This note was uploaded on 01/13/2012 for the course ACCOUNTING 2302 taught by Professor Harris during the Fall '11 term at Dallas Colleges.

Page1 / 8

E10-29A - Student Mukhtar Lakha Instructor Robert Nicholson Assignment Acct 2302 Chapter 10 Date Course Acct2302-7502-Robert Time 8:59 PM

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online