P8-3 P8-7 P8-13 Week 8
Problems
P8-3 Accelerator, Inc. manufactures a
fuel additive, Stomp, 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’scost 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/drum . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . .
1
$17
Direct
labor: 1 hour @ $8/hour . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
$ 8
Factory
Overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .
$ 6
Costs
and expenses during September:
Stomp:
600,000 gallons purchased at a cost of $1,140,000; 645,000 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
1.
Materials quantity variance.
2.
Materials purchase price variance.
3.
Labor efficiency variance.
4.
Labor rate variance.
P8-7 The standard cost summary for the
most popular product of Excelsior Products Company is shown as follows,
together with production and cost data for the period.
Standard
Cost Summary
Materials:
2
gallons of liquid lead@$2.00/gallon . . . . . . . . . . . . . . . . . . . . . .
. . . . . . .
$4.00
2
gallons of varnish@$3.00/gallon . . . . . . . . . . . . . . . . . . . . . . . .
. . . . $6.00 $10.00
Labor:
1
hour@$12.00/hour. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . .
12.00
Factory
overhead:
$1.00
per direct labor hour . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . .
1.00
Total
standard unit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .
$23.00
Production
and Cost Summary
Units
completed during the month . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . .
9,000
Ending
units in process (one-fourth completed) . . . . . . . . . . . . . . . . . .
2,000
Gallons
of liquid lead used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .
21,000
Gallons
of varnish used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
20,000
Direct
labor hours worked . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
10,000
Cost
of liquid lead used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
41,160
Cost
of varnish used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
60,000
Cost
of direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
117,000
One
gallon each of liquid lead and varnish are added at the start of processing.
The balance of the materials is added when the process is two-thirds complete.
Labor and overhead are added evenly throughout the process.
Required:
1.
Calculate equivalent production. (Be sure to refer to the standard cost summary
to help determine the percentage of materials in ending work in process.)
2.
Calculate materials and labor variances and indicate whether they are favorable
or unfavorable.
3.
Determine the cost of materials and labor in the work in process account at the
end of the month.
4.
Prove that all materials and labor costs have been accounted for.
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):
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.
Problem 8-3
|
|
Standard Quantity or
Hours
|
|
Actual Quantity or
Hours
|
|
Difference
|
|
Standard Cost
|
|
Variance
|
|
|
|
1.
|
Materials quantity variance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Surge
|
640,000
|
gal.
|
645,000
|
gal.
|
5,000
|
U
|
$ 2.00
|
/gal.
|
$ 10,000
|
U
|
|
|
Empty drums
|
80,000
|
ea.
|
80,000
|
ea.
|
-
|
|
$ 1.00
|
ea.
|
$ -
|
|
