Problem 1 Direct Labour Variances Sky Inc. provides in-flight meals for a number of major airlines. One of the company's products in stuffed cannelloni with roasted pepper sauce, fresh baby corn, and spring salad. During the most recent week, the company prepared 6,000 of these meals, using 1,150 direct labour-hours. The company paid these direct labour workers a total of $11,500 for this work, or $10 per hour. According to the standard cost card for this meal, it should require 0.20 direct labour- hours at a cost of $9.50 per hour. Required: 1. What direct labour cost should have been incurred to prepare 6,000 meals? How much does this differ from the actual direct labour cost? 2. Break down the difference computed in (1) above into a labour rate variance and a labour efficiency variance. Problem

Problem 1 Direct Labour Variances Sky Inc. provides in-flight meals for a number of major airlines. One of the company's products in stuffed cannelloni with roasted pepper sauce, fresh baby corn, and spring salad. During the most recent week, the company prepared 6,000 of these meals, using 1,150 direct labour-hours. The company paid these direct labour workers a total of $11,500 for this work, or $10 per hour. According to the standard cost card for this meal, it should require 0.20 direct labour- hours at a cost of $9.50 per hour. Required: 1. What direct labour cost should have been incurred to prepare 6,000 meals? How much does this differ from the actual direct labour cost? 2. Break down the difference computed in (1) above into a labour rate variance and a labour efficiency variance. Problem

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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Chapter 23 Mesa Bottle Company (MBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows: Standard Cost per 100 Two-Liter Bottles Cost Category Direct labor Direct materials $1.86 6.48 0.56 Factory overhead Total $8.90 At the beginning of July, MBC management planned to produce 600,000 bottles. The actual number of bottles produced for July was 645,000 bottles. The actual costs for July of the current year were as follows: Actual Cost for the Month Ended Cost Category July 31, 2019 Direct labor $12,143 Direct materials 40,915 Factory overhead Total 3,780 $56,838 a. Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for MBC, assuming planned production. b. Prepare a budget performance report for manufacturing costs, showing the total cost variances direct materials, direct labor, and factory overhead for July. c. Interpret the budget performance report.
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8. Salter Manufacturing Company produces inventory in a highly automated assembly plant in Fall River, Massachusetts. The automated system is in its first year of operation and management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes. For the first six months of operations, the following data were collected: Machine-hours Kilowatt-hours Total Overhead Costs January 4,560 5,424,000 $405,600 February 4,380 5,208,000 404,160 March 4,680 5,400,000 407,040 April 3,960 5,148,000 404,160 May 3,900 5,040,000 391,200 June 3,720 4,944,000 384,000 Required: a. Use the high-low method to determine the estimating cost function with machine-hours as the cost driver. b. Use the high-low method to determine the estimating cost function with kilowatt-hours as the cost driver. c. For July, the company ran the machines for 4,000 hours and used 4,550,000 kilowatt-hours of power. The overhead costs totaled $365,000. Which cost driver was the…
Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand. The company uses a job-order costing system and computes plantwide predetermined overhead rates on a quarterly basis using the number of units to be produced as the allocation base. Its estimated costs, by quarter, for the coming year are given below:QuarterFirst Second Third FourthDirect materials $ 320,000 $ 160,000 $ 80,000 $ 240,000Direct labor 160,000 80,000 40,000 120,000Manufacturing overhead 230,000 206,000 194,000 ?Total manufacturing costs (a) $ 710,000 $ 446,000 $ 314,000 $ ?Number of units to be produced (b) 160,000 80,000 40,000 120,000Estimated unit product cost (a) ÷ (b) $ 4.44 $ 5.58 $ 7.85 $ ?Management finds the variation in quarterly unit product costs to be confusing and difficult to work with. It has been suggested that the problem lies with manufacturing overhead because it is the largest…
Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand. The company uses a job-order costing system and computes plantwide predetermined overhead rates on a quarterly basis using the number of units to be produced as the allocation base. Its estimated costs, by quarter, for the coming year are given below: Quarter First Second Third Fourth Direct materials $ 320,000 $ 160,000 $ 80,000 $ 240,000 Direct labor 80,000 40,000 20,000 60,000 Manufacturing overhead 230,000 206,000 194,000 ? Total manufacturing costs (a) $ 630,000 $ 406,000 $ 294,000 $ ? Number of units to be produced (b) 80,000 40,000 20,000 60,000 Estimated unit product cost (a) ÷ (b) $ 7.88 $ 10.15 $ 14.70 $ ? Management finds the variation in quarterly unit product costs to be confusing and difficult to work with. It has been suggested that the problem lies with…
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Shipping costs for fish that is ordered by the restaurant are a mixed cost with variable and fixed cost components. Records indicate the Fish Company shipped 7,200 tons of halibut for $6,000 in May and 8,200 tons for $6,800 in June. What would be the expected shipping cost for shipping 8,000? $6,440 $9,750 $6,640 $6,200
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Print Item Penny Company manufactures only one product and uses a standard cost system. The following information is from Penny's records for May: Direct labor rate variance $15,000 favorable Direct labor time variance $29,700 unfavorable Standard hours per unit produced 2.00 Standard rate per hour $27 During May, the company used 12.50% more hours than the standard allowed. A. What were the total standard hours allowed for the units manufactured during the month? standard hours B. What were the actual hours worked? actual hours C. How many actual units were produced during May? units produced