Ch8
Problems
E8-14
P8-3 P8-4 P8-5 P8-6 P8-13 Ch8 Problems
E8-14
Calculating factory overhead
The
standard capacity of a factory is 8,000 units per month. Cost and production
data follow: Standard application rate for fixed overhead . . . . . . $0.50 per
unit
Standard
application rate for variable overhead . . . $1.50 per unit
Production—Month
1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,400 units
Production—Month
2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,200 units
Actual
factory overhead—Month 1 . . . . . . . . . . . . . . . $15,100
Actual
factory overhead—Month 2 . . . . . . . . . . . . . . . $17,200
Calculate
the amount of factory overhead allowed for the actual volume of production each
month and the variance between budgeted and actual overhead for each month.
P8-3
Materials and labor variances analyses
Accelerator,
Inc., manufactures a fuel additive, Surge, that has a stable selling price of
$44 per drum. The company has been producing and selling 80,000 drums per
month. In connection with your examination of Accelerator’s financial
statements for the year ended September 30, management has asked you to review
some computations made by Accelerator’s cost accountant. Your working papers disclose
the following about the company’s operations:
Standard
costs per drum of product manufactured:
Materials:
8
gallons of chemicals@$2 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . $16
1 empty
drum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . 1 $17
Direct
labor—1 hour . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . $ 8
Factory
Overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . $ 6
Costs
and expenses during September:
Chemicals:
645,000 gallons purchased at a cost of $1,140,000; 600,000 gallons used.
Empty
drums: 94,000 purchased at a cost of $94,000; 80,000 drums used.
Direct
labor: 81,000 hours worked at a cost of $654,480.
Factory
overhead: $768,000.
Required:
Calculate
the following variances for September, using the formulas on page 386:
1.
Materials quantity variance.
2.
Materials purchase price variance.
3.
Labor efficiency variance.
4.
Labor rate variance.
P8-4
Calculation of materials and labor variances
Prado
Corporation manufactures and sells a single product. The company uses a
standard cost system. The standard cost per unit of product follows:
Materials—1
lb plastic@$3.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . $ 3.00
Direct
labor—1.6 hr@$10.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . 16.00
Factory
overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 4.45
Total .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . $23.45
The
charges to the manufacturing department for November, when 5,000 units were
produced, follow:
Materials—5,300
lb @$3.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . $ 15,900
Direct
labor—8,200 hr@$9.80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . 80,360
Factory
overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 23,815
Total .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . $120,075
The
purchasing department normally buys about the same quantity as is used in
production during a month. In November, 5,500 pounds were purchased at a price
of $2.90 per pound.
Required:
Calculate
the following variances from standard costs for the data given, using the
formulas on pages 386:
1. Materials quantity.
1. Materials quantity.
2.
Materials purchase price (at time of purchase).
3.
Labor efficiency.
4.
Labor rate.
P8-5
Analysis of materials and labor variances
Stylized
Products, Inc., uses a standard cost system in accounting for the cost of
production of its only product, Suave. The standards for the production of one
unit of Suave follow:
Direct
materials: 10 feet of Class at $0.75 per foot and 3 feet of Chic at $1.00 per
foot.
Direct
labor: 4 hours at $8.00 per hour.
Factory
overhead: applied at 150% of standard direct labor costs.
There
was no beginning inventory on hand at July 1. Following is a summary of costs
and related data for the production of Suave during the following year ended
June 30: 100,000 feet of Class were purchased at $0.72 per foot. 30,000 feet of
Chic were purchased at $1.05 per foot.
8,000 units of Suave were produced that required 78,000 feet of Class; 26,000 feet of Chic; and 31,000 hours of direct labor at $7.80 per hour. 6,000 units of product Suave were sold.
8,000 units of Suave were produced that required 78,000 feet of Class; 26,000 feet of Chic; and 31,000 hours of direct labor at $7.80 per hour. 6,000 units of product Suave were sold.
On June
30, there are 22,000 feet of Class, 4,000 feet of Chic, and 2,000 completed
units of Suave on hand. All purchases and transfers are ‘‘charged in’’ at
standard.
Required:
Calculate the following, using the formulas on page 386:
1.
Materials quantity variance for Class.
2.
Materials quantity variance for Chic.
3.
Materials purchase price variance for Class.
4.
Materials purchase price variance for Chic.
5.
Labor efficiency variance.
6.
Labor rate variance.
P8-6
Analysis of materials and labor variances
TBA
Products Companymanufactures a variety of products made of plastic and aluminum
components. During the winter months, substantially all of the production
capacity is devoted to the production of lawn sprinklers for the following
spring and summer seasons.
Other
products aremanufactured during the remainder of the year. The company has
developed tandard costs for its several products. Standard costs for each year
are set in the preceding October. The standard cost of a sprinkler for the
current year is $3.70, computed as follows:
Direct
materials:
Aluminum—0.2
lb@$0.40 per lb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$0.08
Plastic—1.0
lb @$0.38 per lb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . 0.38
Production
labor—0.3 hr@$8.00 per hr . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 2.40
Factory
overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . 0.84
Total .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . $3.70
During
February, TBA Products manufactured 8,500 good sprinklers. The company incurred
the following costs, which it charged to production:
Materials
requisitioned for production:
Aluminum—1,900
lb@$0.40 per lb . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 760
Plastic—Regular
grade—6,000 lb@$0.38 per lb . . . . . . . . . . . . . . . . 2,280
Low
grade—3,500 lb@$0.38 per lb . . . . . . . . . . . . . . . . . . . . . . . . . .
1,330
Production
labor—2,700 hr@$8.60 per hr . . . . . . . . . . . . . . . . . . . . . . .
23,220
Factory
overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 7,140
Costs
charged to production . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . $34,730
Materials
price variations are not determined by usage but are charged to a materials
price variation account at the time the invoice is entered. All materials are
carried in inventory at standard prices. Materials purchases for February were
as follows:
Aluminum—1,800
lb @$0.48 per lb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 864
Plastic—Regular
grade—3,000 lb@$0.50 per lb . . . . . . . . . . . . . . . . . . . 1,500
Low
grade*—6,000 lb@$0.29 per lb . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 1,740
*Due to
plastic shortages, the company was forced to purchase lower grade plastic than
called for in the standards. This increased the number of sprinklers rejected
on inspection.
Required:
Calculate
price and usage variances for each type of material and for labor, using the
formulas on page 386.
P8-13
Materials, labor, and overhead variances—two-variance method
Fargo
Company manufactures products in batches of 100 units per batch. The company
uses a standard cost system and prepares budgets that call for 500 of these
batches per period. Fixed overhead is $60,000 per period. The standard costs
per batch follow:
Material
(80 gallons) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . $ 32
Labor
(60 hours) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . 480
Factory
overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . 252
Standard
cost per batch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . $764
During
the period, 503 batches were manufactured, and the following costs were
incurred: Materials used (40,743 gallons) . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . $ 15,482.34
Labor
(29,677 hours at $8.65 per hour) . . . . . . . . . . . . . . . . . . . . . . .
. . . 256,706.05
Actual
variable overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . 67,080.00
Actual
fixed overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . 60,500.00
Required:
Calculate the variances for materials, labor, and overhead. For overhead, use the two-variance method.
Calculate the variances for materials, labor, and overhead. For overhead, use the two-variance method.
TUTORIAL PREVIEW
Problem 8-13
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When amounts or
calculations are correct the cell will change to green.
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1.
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Standard Cost of
Production for October
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Lot
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Quantity (Dozens)
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Standard Cost per Dozen
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Total Standard Cost
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30
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1,000
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$ 41.25
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$ 41,250
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31
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1,700
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$ 41.25
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70,125
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32
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1,200
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$ 35.64
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42,768
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Standard cost of production
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$
154,143
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