Folsom
Shirts, Inc., manufactures men’s sport shirts for large stores. Folsom produces
a single quality shirt in lots of a dozen according to each customer’s order
and attaches the store’s label.
P8-13
Variance analysis - Folsom Shirts, Inc., manufactures men’s sport shirts for
large stores. Folsom produces a single
P8-13
Folsom Shirts, Inc., manufactures men’s sport shirts for large stores. Folsom
produces a single quality shirt in lots of a dozen according to each customer’s
order and attaches the store’s label.
The
standard costs for a dozen shirts include the following:
Direct
materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24yards@$0.55/yard $13.20
Direct
labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3hours@$7.35/hour 22.05
Factory
overhead . . . . . . . . . . . . . . . . . . . . . . . . . . 3hours@$2.00/hour 6.00
Standard
cost per dozen . . . . . . . . . . . . . . . . . .
$41.25
During
October, Folsum worked on three orders for shirts. Job cost records for the
month disclose the following:
Lot Units in Lot Materials Used Hours Worked
30 1,000 dozen 24,100 yards 2,980
31 1,700 dozen 40,440 yards 5,130
32 1,200 dozen 28,825 yards 2,890
The
following information is also available:
a.
Folsom purchased 95,000 yards of materials during October at a cost of $53,200.
The materials price variance is recorded when goods are purchased, and all
inventories are carried at standard cost.
b.
Direct labor incurred amounted to $81,400 during October. According to payroll
records, production employees were paid $7.40 per hour.
c.
Overhead is applied on the basis of direct labor hours. Factory overhead
totaling $22,800 was incurred during October.
d.
A total of $288,000 was budgeted for overhead for the year, based on estimated
production at the plant’s normal capacity of 48,000 dozen shirts per year.
Overhead is 40% fixed and 60% variable at this level of production.
e.
There was no work in process at October 1. During October, Lots 30 and 31 were
completed, and all materials were issued for Lot 32, which was 80% completed as
to labor and overhead.
Required:
1.
Prepare a schedule computing the October standard cost of Lots 30, 31, and 32.
2.
Prepare a schedule computing the materials price variance for October and
indicate whether it is favorable or unfavorable.
3.
For each lot produced during October, prepare schedules computing the following
(indicate whether favorable or unfavorable):
a.Materials
quantity variance in yards.
b.
Labor efficiency variance in hours. (Hint: Don’t forget the percentage of
completion.)
c.
Labor rate variance in dollars.
4.
Prepare a schedule computing the total controllable and volume overhead
variances for October and indicate whether they are favorable or unfavorable.
SOLUTION
PREVIEW
Problem
8-13
|
Standard
Cost of Production for October
|
||||
|
Lot
|
Quantity
(Dozens)
|
Standard
Cost per Dozen
|
Total
Standard Cost
|
|
|
30
|
1,000
|
$ 41.25
|
$ 41,250
|
|
|
31
|
1,700
|
$ 41.25
|
70,125
|
|
|
32
|
1,200
|
$ 35.64
|
42,768
|
|
NOTE
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