E11-3 Stefani Company has gathered the following information about its product.
- Direct materials. Each unit of product contains 4.5 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.5 pounds. Materials cost $5 per pound, but Stefani always takes the 2% cash discount all of its suppliers offer. Freight costs average $0.25 per pound.
- Direct labor. Each unit requires 2 hours of labor. Setup, cleanup, and downtime average 0.4 hours per unit. The average hourly pay rate of Stefani’s employees is $12. Payroll taxes and fringe benefits are an additional $3 per hour.
- Manufacturing overhead. Overhead is applied at a rate of $7 per direct labor hour.
Instructions
Compute Stefani’s total standard cost per unit.
Compute labor cost and labor quantity variance.
E11-6 Lewis Company’s standard labor cost of producing one unit of Product DD is 4 hours at the rate of $12.00 per hour. During August, 40,600 hours of labor are incurred at a cost of $12.15 per hour to produce 10,000 units of Product DD.
Instructions
- Compute the total labor variance.
- Compute the labor price and quantity variances.
- Repeat (b), assuming the standard is 4.1 hours of direct labor at $12.25 per hour.
Compute materials and labor variances.
E11-12 Byrd Company produces one product, a putter called GO-Putter. Byrd uses a standard cost system and determines that it should take one hour of direct labor to produce one GO-Putter. The normal production capacity for this putter is 100,000 units per year. The total budgeted overhead at normal capacity is $850,000 comprised of $250,000 of variable costs and $600,000 of fixed costs. Byrd applies overhead on the basis of direct labor hours.
During the current year, Byrd produced 95,000 putters, worked 94,000 direct labor hours, and incurred variable overhead costs of $256,000 and fixed overhead costs of $600,000.
Instructions
- Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.
- Compute the applied overhead for Byrd for the year.
- Compute the total overhead variance.
Compute variances for materials.
P11-2A Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2017.
| Costs and Production Data | Actual | Standard |
| Raw materials unit cost | $2.25 | $2.10 |
| Raw materials units used | 10,600 | 10,000 |
| Direct labor payroll | $120,960 | $120,000 |
| Direct labor hours worked | 14,400 | 15,000 |
| Manufacturing overhead incurred | $189,500 | |
| Manufacturing overhead applied | $193,500 | |
| Machine hours expected to be used at normal capacity | 42,500 | |
| Budgeted fixed overhead for June | $55,250 | |
| Variable overhead rate per machine hour | $3.00 | |
| Fixed overhead rate per machine hour | $1.30 |
Overhead is applied on the basis of standard machine hours. Three hours of machine time are required for each direct labor hour. The jobs were sold for $400,000. Selling and administrative expenses were $40,000. Assume that the amount of raw materials purchased equaled the amount used.
Instructions
- Compute all of the variances for (1) direct materials and (2) direct labor.
(a) LQV $4,800 F
- Compute the total overhead variance.
- Prepare an income statement for management. (Ignore income taxes.)
Compute and identify signifi cant variances.
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