Butrico Manufacturing Corporation uses a standard cost system, records materials price variances when direct materials are purchased, and prorates all variances at year-end. Variances associated with direct materials are prorated based on the balances of direct materials in the appropriate accounts, and variances associated with direct labor and manufacturing overhead are prorated to Finished Goods Inventory and to Cost of Goods Sold (COGS) on the basis of the relative direct labor cost in these accounts at year- end. The following information is for the year ended December 31: The company had no beginning inventories and no ending Work-in-Process (WIP) Inventory. It applies manufacturing overhead at 80% of standard direct labor cost. Finished goods inventory at 12/31: Direct materials Direct labor Applied manufacturing overhead Direct materials inventory at 12/31 $ 96,570 144,855 115,884 66.100
Butrico Manufacturing Corporation uses a standard cost system, records materials price variances when direct materials are purchased, and prorates all variances at year-end. Variances associated with direct materials are prorated based on the balances of direct materials in the appropriate accounts, and variances associated with direct labor and manufacturing overhead are prorated to Finished Goods Inventory and to Cost of Goods Sold (COGS) on the basis of the relative direct labor cost in these accounts at year- end. The following information is for the year ended December 31: The company had no beginning inventories and no ending Work-in-Process (WIP) Inventory. It applies manufacturing overhead at 80% of standard direct labor cost. Finished goods inventory at 12/31: Direct materials Direct labor Applied manufacturing overhead Direct materials inventory at 12/31 $ 96,570 144,855 115,884 66.100
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Butrico Manufacturing Corporation uses a standard cost system, records materials price variances when direct materials are
purchased, and prorates all variances at year-end. Variances associated with direct materials are prorated based on the balances of
direct materials in the appropriate accounts, and variances associated with direct labor and manufacturing overhead are prorated to
Finished Goods Inventory and to Cost of Goods Sold (COGS) on the basis of the relative direct labor cost in these accounts at year-
end.
The following information is for the year ended December 31:
The company had no beginning inventories and no ending Work-in-Process (WIP) Inventory. It applies manufacturing overhead at 80%
of standard direct labor cost.
Finished goods inventory at 12/31:
Direct materials
Direct labor
Applied manufacturing overhead
Direct materials inventory at 12/31
Cost of goods sold for the year ended 12/31:
Direct materials
Direct labor
Applied manufacturing overhead
Direct materials price variance (unfavorable)
Direct materials usage variance (favorable)
Direct labor rate variance (unfavorable)
Direct labor efficiency variance (favorable)
Actual manufacturing overhead incurred
$ 96,578
144,855
115,884
66,100
$ 386,288
820,845
656,676
11, 100
16,650
22,200
5,550
765,900
Required:
1. Compute the amount of Direct Materials Price Variance to be prorated to Finished Goods Inventory at December 31.
2. Compute the total amount of direct materials cost in the Finished Goods Inventory at December 31, after all materials variances have
been prorated.
3. Compute the total amount of direct labor cost in the Finished Goods Inventory at December 31, after all variances have been
prorated,
4. Compute the total Cost of Goods Sold (COGS) for the year ended December 31, after all variances have been prorated.
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