Computing and journalizing standard cost variancesMcKnight manufactures coffee mugs that it sells to other companies for customizing withtheir own logos. McKnight prepares flexible budgets and uses a standard cost system tocontrol manufacturing costs. The standard unit cost of a coffee mug is based on static budgetvolume of 59,800 coffee mugs per month:Direct Materials (0.2 lbs. @ $0.25 per Ib.)$ 0.05Direct Labor (3 minutes @ $0.11 per minute)0.33Manufacturing Overhead:Variable (3 minutes @ $0.06 per minute)$ 0.18Fixed (3 minutes @ $0.15 per minute)0.450.63Total Cost Per Coffee Mug$ 1.01Actual cost and production information for July 2020 follow:а.Actual production and sales were 62,500 coffee mugs.b. Actual direct materials usage was 10,000 Ibs. at an actual cost of $0.17 per Ib.Actual direct labor usage of 198,000 minutes at a cost of $25,740.d. Actual overhead cost was $8,500 variable and $32,100 fixed.e. Selling and administrative costs were $110,000.C. Requirements1. Compute the cost and efficiency variances for direct materials and direct labor.2. Journalize the usage of direct materials and the assignment of direct labor, including therelated variances.3. For manufacturing overhead, compute the variable overhead cost and efficiencyvariances and the fixed overhead cost and volume variances.

Direct material price variance = (Standard price - Actual price) ×Actual quantity=($0.05 - $0.17)…

McKnight manufactures coffee mugs that it sells to other companies for customizing with their own logos. McKnight prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budge volume of 59,800 coffee mugs per month: Direct Materials (0.2 lbs. @ $0.25 per Ib.) $ 0.05 Direct Labor (3 minutes @ $0.11 per minute) 0.33 Manufacturing Overhead: Variable (3 minutes @ $0.06 per minute) $ 0.18 Fixed (3 minutes @ $0.15 per minute) 0.45 0.63 Total Cost Per Coffee Mug $ 1.01 Actual cost and production information for July 2020 follow: a. Actual production and sales were 62,500 coffee mugs. b. Actual direct materials usage was 10,000 Ibs. at an actual cost of $0.17 per Ib. Actual direct labor usage of 198,000 minutes at a cost of $25,740. d. Actual overhead cost was $8,500 variable and $32,100 fixed. e. Selling and administrative costs were $110,000.

McKnight manufactures coffee mugs that it sells to other companies for customizing with their own logos. McKnight prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budge volume of 59,800 coffee mugs per month: Direct Materials (0.2 lbs. @ $0.25 per Ib.) $ 0.05 Direct Labor (3 minutes @ $0.11 per minute) 0.33 Manufacturing Overhead: Variable (3 minutes @ $0.06 per minute) $ 0.18 Fixed (3 minutes @ $0.15 per minute) 0.45 0.63 Total Cost Per Coffee Mug $ 1.01 Actual cost and production information for July 2020 follow: a. Actual production and sales were 62,500 coffee mugs. b. Actual direct materials usage was 10,000 Ibs. at an actual cost of $0.17 per Ib. Actual direct labor usage of 198,000 minutes at a cost of $25,740. d. Actual overhead cost was $8,500 variable and $32,100 fixed. e. Selling and administrative costs were $110,000.

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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