Direct materials (7 lbs. @ $5.40) Direct labor (1.75 hrs. @ $18) Variable overhead (1.75 hrs. @ $4.00) Fixed overhead (1.75 hrs. @ $3.00) Standard unit cost $37.80 31.50 7.00 5.25 $81.55 During the year, Petrillo had the following activity related to valve production: a. Production of valves totaled 20,600 units. b. A total of 135,400 pounds of direct materials was purchased at $5.36 per pound. c. There were 10,000 pounds of direct materials in beginning inventory (carried at $5.40 per pound). There was no ending inventory. d. The company used 36,500 direct labor hours at a total cost of $656,270. e. Actual fixed overhead totaled $110,000. f. Actual variable overhead totaled $168,000. Petrillo produces all of its valves in a single plant. Normal activity is 20,000 units per year. Stand- ard overhead rates are computed based on normal activity measured in standard direct labor hours. Required: 1. Compute the direct materials price and usage variances. 2. Compute the direct labor rate and efficiency variances. 3. Compute overhead variances using a two-variance analysis.

Direct materials (7 lbs. @ $5.40) Direct labor (1.75 hrs. @ $18) Variable overhead (1.75 hrs. @ $4.00) Fixed overhead (1.75 hrs. @ $3.00) Standard unit cost $37.80 31.50 7.00 5.25 $81.55 During the year, Petrillo had the following activity related to valve production: a. Production of valves totaled 20,600 units. b. A total of 135,400 pounds of direct materials was purchased at $5.36 per pound. c. There were 10,000 pounds of direct materials in beginning inventory (carried at $5.40 per pound). There was no ending inventory. d. The company used 36,500 direct labor hours at a total cost of $656,270. e. Actual fixed overhead totaled $110,000. f. Actual variable overhead totaled $168,000. Petrillo produces all of its valves in a single plant. Normal activity is 20,000 units per year. Stand- ard overhead rates are computed based on normal activity measured in standard direct labor hours. Required: 1. Compute the direct materials price and usage variances. 2. Compute the direct labor rate and efficiency variances. 3. Compute overhead variances using a two-variance analysis.

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Description: Please do not give image format and solve all required 4Problem 9.32 Basic Variance Analysis, Revision of Standards, Journal EntriesPetrillo Company produces engine parts for large motors. The company uses a standard costsystem for production costing

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter24: Material And Labor Variances (primevar)

Section: Chapter Questions

Problem 1R

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Concept explainers

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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Question

Please do not give image format and solve all required

4
Problem 9.32 Basic Variance Analysis, Revision of Standards, Journal Entries
Petrillo Company produces engine parts for large motors. The company uses a standard cost
system for production costing and control. The standard cost sheet for one of its higher volume
products (a valve) is as follows:

Direct materials (7 lbs. @ $5.40)
Direct labor (1.75 hrs. @ $18)
Variable overhead (1.75 hrs. @ $4.00)
Fixed overhead (1.75 hrs. @ $3.00)
Standard unit cost
$37.80
31.50
7.00
5.25
$81.55
During the year, Petrillo had the following activity related to valve production:
a. Production of valves totaled 20,600 units.
b. A total of 135,400 pounds of direct materials was purchased at $5.36 per pound.
C.
There were 10,000 pounds of direct materials in beginning inventory (carried at $5.40 per
pound). There was no ending inventory.
d. The company used 36,500 direct labor hours at a total cost of $656,270.
e. Actual fixed overhead totaled $110,000.
f. Actual variable overhead totaled $168,000.
Petrillo produces all of its valves in a single plant. Normal activity is 20,000 units per year. Stand-
ard overhead rates are computed based on normal activity measured in standard direct labor hours.
Required:
1. Compute the direct materials price and usage variances.
2. Compute the direct labor rate and efficiency variances.
3. Compute overhead variances using a two-variance analysis.
4. Compute overhead variances using a four-variance analysis.
5. Assume that the purchasing agent for the valve plant purchased a lower-quality direct mate-
rial from a new supplier. Would you recommend that the company continue to use this
cheaper direct material? If so, what standards would likely need revision to reflect this deci-
sion? Assume that the end product's quality is not significantly affected.
6. Prepare all possible journal entries (assuming a four-variance analysis of overhead variances).
in lournal Entries

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Basic Variance Analysis, Revision of Standards, Journal Entries Petrillo Company produces engine parts for large motors. The company uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products (a valve) is as follows: Direct materials (7 lbs. @ $5.40) $37.80 Direct labor (1.75 hrs. @ $18) 31.50 Variable overhead (1.75 hrs. @ $4.00) 7.00 Fixed overhead (1.75 hrs. @ $3.00) 5.25 Standard cost per unit $81.55 During the year, Petrillo had the following activity related to valve production: Production of valves totaled 20,600 units. A total of 135,500 pounds of direct materials was purchased at $5.36 per pound. There were 10,000 pounds of direct materials in beginning inventory (carried at $5.40 per pound). There was no ending inventory. The company used 36,500 direct labor hours at a total cost of $656,270. Actual fixed overhead totaled $111,000. Actual variable overhead totaled $169,000. Petrillo produces…
Basic Variance Analysis, Revision of Standards, Journal Entries Petrillo Company produces engine parts for large motors. The company uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products (a valve) is as follows: Direct materials (7 lbs. @ $5.40) $37.80 Direct labor (1.75 hrs. @ $18) 31.50 Variable overhead (1.75 hrs. @ $4.00) 7.00 Fixed overhead (1.75 hrs. @ $3.00) 5.25 Standard cost per unit $81.55 During the year, Petrillo had the following activity related to valve production: Production of valves totaled 20,600 units. A total of 135,500 pounds of direct materials was purchased at $5.36 per pound. There were 10,000 pounds of direct materials in beginning inventory (carried at $5.40 per pound). There was no ending inventory. The company used 36,500 direct labor hours at a total cost of $656,270. Actual fixed overhead totaled $111,000. Actual variable overhead totaled $169,000. Petrillo produces…
Basic Variance Analysis, Revision of Standards, Journal Entries Petrillo Company produces engine parts for large motors. The company uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products (a valve) is as follows: Direct materials (7 lbs. @ $5.40) $37.80 Direct labor (1.75 hrs. @ $18) 31.50 Variable overhead (1.75 hrs. @ $4.00) 7.00 Fixed overhead (1.75 hrs. @ $3.00) 5.25 Standard cost per unit $81.55 During the year, Petrillo had the following activity related to valve production: Production of valves totaled 20,600 units. A total of 135,600 pounds of direct materials was purchased at $5.36 per pound. There were 10,000 pounds of direct materials in beginning inventory (carried at $5.40 per pound). There was no ending inventory. The company used 36,500 direct labor hours at a total cost of $656,270. Actual fixed overhead totaled $110,000. Actual variable overhead totaled $170,000. Petrillo produces…
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