Problems 1. Use the following standard cost card for 1 gallon of ice cream to answer the questions. Product: Gallon of Ice Cream Manufacturing Costs Direct Materials Cream Sugar Direct Labor Total Direct Costs ● Standard Cost Card Standard Quantity 5 quarts 16 ounces 3 minutes x Standard Cost per Unit $1.15 per quart $.08 per ounce $36.00 per hour Actual direct costs incurred to make 50 gallons of ice cream: 275 quarts of cream at $1.05 per quart 832 ounces of sugar at $0.075 per ounce 165 minutes of labor at $37 per hour All material used was bought during the current period. = Cost Summary $5.75 $1.28 $1.80 $8.83

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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**Problems**

1. Use the following standard cost card for 1 gallon of ice cream to answer the questions.

**Standard Cost Card**

| Product: Gallon of Ice Cream |        |                           |                    |
|------------------------------|--------|---------------------------|--------------------|
| Manufacturing Costs          | Standard Quantity | x Standard Cost per Unit  | = Cost Summary       |
| Direct Materials             |                    |                           |                    |
| Cream                        | 5 quarts           | $1.15 per quart           | $5.75              |
| Sugar                        | 16 ounces          | $0.08 per ounce           | $1.28              |
| Direct Labor                 | 3 minutes          | $36.00 per hour           | $1.80              |
| Total Direct Costs           |                    |                           | $8.83              |

**Actual direct costs incurred to make 50 gallons of ice cream:**

- 275 quarts of cream at $1.05 per quart
- 832 ounces of sugar at $0.075 per ounce
- 165 minutes of labor at $37 per hour

All material used was bought during the current period.

**Questions:**

a. Compute the material price, quantity, and total variances.

b. Compute the labor price quantity, and total variances.

c. What are possible causes of the material and labor variances with respect to the company?
Transcribed Image Text:**Problems** 1. Use the following standard cost card for 1 gallon of ice cream to answer the questions. **Standard Cost Card** | Product: Gallon of Ice Cream | | | | |------------------------------|--------|---------------------------|--------------------| | Manufacturing Costs | Standard Quantity | x Standard Cost per Unit | = Cost Summary | | Direct Materials | | | | | Cream | 5 quarts | $1.15 per quart | $5.75 | | Sugar | 16 ounces | $0.08 per ounce | $1.28 | | Direct Labor | 3 minutes | $36.00 per hour | $1.80 | | Total Direct Costs | | | $8.83 | **Actual direct costs incurred to make 50 gallons of ice cream:** - 275 quarts of cream at $1.05 per quart - 832 ounces of sugar at $0.075 per ounce - 165 minutes of labor at $37 per hour All material used was bought during the current period. **Questions:** a. Compute the material price, quantity, and total variances. b. Compute the labor price quantity, and total variances. c. What are possible causes of the material and labor variances with respect to the company?
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