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1. Compute the direct materials price and efficiency variances. 2. Compute the direct labor price and efficiency variances. 3. Compute the variable overhead price and efficiency variances.

1. Compute the direct materials price and efficiency variances. 2. Compute the direct labor price and efficiency variances. 3. Compute the variable overhead price and efficiency variances.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Golden Food Products produces special-formula pet food. The company carries no inventories. The master budget calls for the company to manufacture and sell 120,000 cases at a budgeted price of $60 per case this year. The standard direct cost sheet for one case of pet food follows: Direct materials (3 pounds @ $2) $6 Direct labor (0.25 hours @ $32) 8 Variable overhead is applied based on direct labor-hours. The variable overhead rate is $16 per direct labor-hour. The fixed overhead rate (at the master budget level of activity) is $12 per unit. All nonmanufacturing costs are fixed and are budgeted at $2.2 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $336,000 favorable. The following is the actual income statement (in thousands of dollars) for the year for Golden Food Products: Sales revenue $ 7,800 Less variable costs Direct materials Direct labor Variable overhead 800 992 515 Total variable costs Contribution margin Less fixed costs Fixed manufacturing overhead 1,480 Nonmanufacturing costs 2,125 Total fixed costs $3,605 Operating profit $ 1,888 During the year, the company purchased 320,000 pounds of material and employed 32,500 hours of direct labor. Required: 1. Compute the direct materials price and efficiency variances. 2. Compute the direct labor price and efficiency variances. 3. Compute the variable overhead price and efficiency variances. $ 2,307 $ 5,493 Note: For all requirements, enter your answers in whole dollars. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.
Transcribed Image Text:Golden Food Products produces special-formula pet food. The company carries no inventories. The master budget calls for the company to manufacture and sell 120,000 cases at a budgeted price of $60 per case this year. The standard direct cost sheet for one case of pet food follows: Direct materials (3 pounds @ $2) $6 Direct labor (0.25 hours @ $32) 8 Variable overhead is applied based on direct labor-hours. The variable overhead rate is $16 per direct labor-hour. The fixed overhead rate (at the master budget level of activity) is $12 per unit. All nonmanufacturing costs are fixed and are budgeted at $2.2 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $336,000 favorable. The following is the actual income statement (in thousands of dollars) for the year for Golden Food Products: Sales revenue $ 7,800 Less variable costs Direct materials Direct labor Variable overhead 800 992 515 Total variable costs Contribution margin Less fixed costs Fixed manufacturing overhead 1,480 Nonmanufacturing costs 2,125 Total fixed costs $3,605 Operating profit $ 1,888 During the year, the company purchased 320,000 pounds of material and employed 32,500 hours of direct labor. Required: 1. Compute the direct materials price and efficiency variances. 2. Compute the direct labor price and efficiency variances. 3. Compute the variable overhead price and efficiency variances. $ 2,307 $ 5,493 Note: For all requirements, enter your answers in whole dollars. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.
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