Landram Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct materials 2.0 liters Direct labor 1.5 hours $7.00 per liters $15.00 per hour $3.00 per hour Variable overhead 1.5hours The company produced 4,500 units in April using 10,210 liters of direct material and 2,190 direct labor hours. During the month, the company purchased 10,780 liters of direct material at $7.20.per liter. The actual direct labor rate was $15.60 per hour and the actual variable overhead rate was $2.90 per hour. The company applies variable overhead on the basis of direct labor hours. The direct materials purchases variance is computed when the materials are purchased. The materials quantity variance for April is: a. $8,470 U b. $8,712 U c. $8,712 F d. $8,470 F

Landram Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct materials 2.0 liters Direct labor 1.5 hours $7.00 per liters $15.00 per hour $3.00 per hour Variable overhead 1.5hours The company produced 4,500 units in April using 10,210 liters of direct material and 2,190 direct labor hours. During the month, the company purchased 10,780 liters of direct material at $7.20.per liter. The actual direct labor rate was $15.60 per hour and the actual variable overhead rate was $2.90 per hour. The company applies variable overhead on the basis of direct labor hours. The direct materials purchases variance is computed when the materials are purchased. The materials quantity variance for April is: a. $8,470 U b. $8,712 U c. $8,712 F d. $8,470 F

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter9: Standard Costing: A Functional-based Control Approach

Section: Chapter Questions

Problem 30P: Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following...

See similar textbooks

Similar questions

Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is $25 per unit and $40 s used in direct labor, while the direct material for the double is $40 per unit, and the labor cost is $50 per unit. Box Springs estimates it will make 5,000 twins and 9,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?
Box Springs. Inc., makes two sizes of box springs: queen and king. The direct material for the queen is $35 per unit and $55 is used in direct labor, while the direct material for the king is $55 per unit, and the labor cost is $70 per unit. Box Springs estimates it will make 4,300 queens and 3,000 kings in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?
During the week of May 10, Hyrum Manufacturing produced and shipped 16,000 units of its aluminum wheels: 4,000 units of Model A and 12,000 units of Model B. The cycle time for Model A is 1.09 hours and for Model B is 0.47 hour. The following costs and production hours were incurred: Required: 1. Assume that the value-stream costs and total units shipped apply only to one model (a single-product value stream). Calculate the unit cost, and comment on its accuracy. 2. Assume that Model A is responsible for 40% of the materials cost. Calculate the unit cost for Models A and B, and comment on its accuracy. Explain the rationale for using units shipped instead of units produced in the calculation. 3. Calculate the unit cost for the two models, using DBC. Explain when and why this cost is more accurate than the unit cost calculated in Requirement 2.
Business Specialty, Inc., manufactures two staplers: small and regular. The standard quantities of direct labor and direct materials per unit for the year are as follows: The standard price paid per pound of direct materials is 1.60. The standard rate for labor is 8.00. Overhead is applied on the basis of direct labor hours. A plantwide rate is used. Budgeted overhead for the year is as follows: The company expects to work 12,000 direct labor hours during the year; standard overhead rates are computed using this activity level. For every small stapler produced, the company produces two regular staplers. Actual operating data for the year are as follows: a. Units produced: small staplers, 35,000; regular staplers, 70,000. b. Direct materials purchased and used: 56,000 pounds at 1.5513,000 for the small stapler and 43,000 for the regular stapler. There were no beginning or ending direct materials inventories. c. Direct labor: 14,800 hours3,600 hours for the small stapler and 11,200 hours for the regular stapler. Total cost of direct labor: 114,700. d. Variable overhead: 607,500. e. Fixed overhead: 350,000. Required: 1. Prepare a standard cost sheet showing the unit cost for each product. 2. Compute the direct materials price and usage variances for each product. Prepare journal entries to record direct materials activity. 3. Compute the direct labor rate and efficiency variances for each product. Prepare journal entries to record direct labor activity. 4. Compute the variances for fixed and variable overhead. Prepare journal entries to record overhead activity. All variances are closed to Cost of Goods Sold. 5. Assume that you know only the total direct materials used for both products and the total direct labor hours used for both products. Can you compute the total direct materials and direct labor usage variances? Explain.
Cozy, Inc., manufactures small and large blankets. It estimates $350,000 in overhead during the manufacturing of 75,000 small blankets and 25,000 large blankets. What is the predetermined overhead rate if a small blanket takes 1 machine hour and a large blanket takes 2 machine hours?
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: 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. Standard 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 material 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 decision? Assume that the end products quality is not significantly affected. 6. Prepare all possible journal entries (assuming a four-variance analysis of overhead variances).
Bobcat uses a traditional cost system and estimates next years overhead will be $800.000, as driven by the estimated 25,000 direct labor hours. It manufactures three products and estimates the following costs: If the labor rate is $30 per hour, what is the per-unit cost of each product?
During the week of August 21, Parley Manufacturing produced and shipped 4,000 units of its machine tools: 1,500 units of Tool SK1 and 2,500 units of Tool SK3. The cycle time for SK1 is 0.73 hour, and the cycle time for SK3 is 0.56 hour. The following costs were incurred: Required: 1. Assume that the value-stream costs and total units shipped apply only to one model (a single-product value stream). Calculate the unit cost, and comment on its accuracy. 2. Assume that Tool SK1 is responsible for 60% of the materials cost. Calculate the unit cost for Tool SK 1 and Tool SK3, and comment on its accuracy. Explain the rationale for using units shipped instead of units produced in the calculation. 3. Calculate the unit cost for the two models, using DBC. Explain when and why this cost is more accurate than the unit cost calculated in Requirement 2.
Genuine Spice Inc. began operations on January 1 of the current year. The company produces 8-ounce bottles of hand and body lotion called Eternal Beauty. The lotion is sold wholesale in 12-bottle cases for 100 per case. There is a selling commission of 20 per case. The January direct materials, direct labor, and factory overhead costs are as follows: DIRECT MATERIALS Cost Behavior Units per Case Cost per Unit Direct Materials Cost per Case Cream base Variable 100 ozs. 0.02 2.00 Natural oils Variable 30ozs. 0.30 9.00 Bottle (8-OZ-) Variable 12 bottles 0.50 6.00 17.00 DIRECT LABOR Department Cost Behavior Time per Case Labor Rate per Hour Direct Labor Cost per Case Mixing Variable 20 min. 18.00 6.00 Filling Variable 5 14.40 1.2 25 min. 7.20 FACTORY OVERHEAD Cost Behavior Total Cost Utilities Mixed 600 Facility lease Fixed 14,000 Equipment depreciation Fixed 4,300 Supplies Fixed 660 19,560 Part ABreak-Even Analysis The management of Genuine Spice Inc. wishes to determine the number of cases required to break even per month. The utilities cost, which is part of factory overhead, is a mixed cost. The following information was gathered from the first six months of operation regarding this cost: Month Case Production Utility Total Cost January 500 600 February 800 660 March 1,200 740 April 1,100 720 May 950 690 June 1,025 705 Instructions 1. Determine the fixed and variable portions of the utility cost using the high-low method. 2. Determine the contribution margin per ease. 3. Determine the fixed costs per month, including the utility fixed cost from part (1). 4. Determine the break-even number of cases per month. Part BAugust Budgets During July of the current year, the management of Genuine Spice Inc. asked the controller to prepare August manufacturing and income statement budgets. Demand was expected to be 1,500 cases at 100 per case for August. Inventory planning information is provided as follows: Finished Goods Inventory: Cases Cost Estimated finished goods inventory, August 1 300 12,000 Desired finished goods inventory, August 31 175 7,000 Materials Inventory: Cream Base (ozs.) Oils (ozs.) Bottles (bottles) Estimated materials inventory, August 1 250 290 600 Desired materials inventory, August 31 1,000 360 240 There was negligible work in process inventory assumed for either the beginning or end of the month; thus, none was assumed. In addition, there was no change in tile cost per unit or estimated units per case operating data from January. Instructions 5. Prepare the August production budget. 6. Prepare the August direct materials purchases budget. 7. Prepare the August direct labor budget. Round the hours required for production to the nearest hour. 8. Prepare the August factory overhead budget. 9. Prepare the August budgeted income statement, including selling expenses. Part CAugust Variance Analysis During September of the current year, the controller was asked to perform variance analyses for August. The January operating data provided the standard prices, rates, times, and quantities per case. There were 1,500 actual cases produced during August, which was 250 more cases than planned at the Beginning of the month. Actual data for August were as follows: Actual Direct Materials Price per Unit Actual Direct Materials Quantity per Case Cream base 0.016 per oz. 102 ozs. Natural oils 0.32 per oz. 31 ozs. Bottle (8 oz.) 0.42 per bottle 12.5 bottles Actual Direct Labor Rate Actual Direct Labor Time per Case Mixing 18.20 19.50 min. Filling 14.00 5.60 min. Actual variable overhead 305.00 Normal volume 1,600 cases The prices of the materials were different than .standard due to fluctuations in market prices. The standard quantity of materials used per case was an ideal standard. The Mixing Department used a higher grade labor classification during the month, thus causing the actual labor rale to exceed standard. The Filling Department used a lower grade labor classification during the month, thus causing the actual labor rate to be less titan standard. Instructions 10. Determine and interpret the direct materials price and quantity variances for the three materials. 11. Determine and interpret the direct labor rate and time variances for the two departments. Round hours to the nearest hour. 12. Determine and interpret the factory overhead controllable variance. 13. Determine and interpret the factory overhead volume variance. 14. Why are the standard direct labor and direct materials costs in the calculations for parts (10) and (11) based on the actual 1,500-case production volume rather than the planned 1,250 cases of production used in the budgets for parts (6) and (7)?
Plata Company has identified the following overhead activities, costs, and activity drivers for the coming year: Plata produces two models of microwave ovens with the following activity demands: The companys normal activity is 21,000 machine hours. Calculate the total overhead cost that would be assigned to Model X using an activity-based costing system: a. 230,000 b. 240,000 c. 280,000 d. 190,000
Colonels uses a traditional cost system and estimates next years overhead will be $480,000, with the estimated cost driver of 240,000 direct labor hours. It manufactures three products and estimates these costs: If the labor rate is $25 per hour, what is the per-unit cost of each product?
Remarkable Enterprises requires four units of part A for every unit of Al that it produces. Currently, part A is made by Remarkable, with these per-unit costs in a month when 4,000 units were produced: Variable manufacturing overhead is applied at $1.60 per unit. The other $0.50 of overhead consists of allocated fixed costs. Remarkable will need 8,000 units of part A for the next years production. Altoona Corporation has offered to supply 8,000 units of part A at a price of $8.00 per unit. If Remarkable accepts the offer, all of the variable costs and $2,000 of the fixed costs will be avoided. Should Remarkable accept the offer from Altoona Corporation?