The standard cost summary for the
most popular product of Excelsior Products Company is shown as follows
P8-7
Materials and labor variance analyses
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.
TUTORIAL
PREVIEW
Problem 8-7
|
1.
|
Equivalent Production
|
Units
|
|
Materials:
|
||
|
Completed during the
month
|
9000
|
|
|
Equivalent units in
ending work in process
|
1000
|
|
|
Total
|
10000
|
