Sales Revenue (at standard) Cost of Goods Sold (at standard) $ 610,000 348,000 Direct Materials Cost Variance 1,500 F Direct Materials Efficiency Variance 6,600 F Direct Labor Cost Variance 4,200 U Direct Labor Efficiency Variance Variable Overhead Cost Variance Variable Overhead Efficiency Variance 2,700 F 2,800 U 1,100 U Fixed Overhead Cost Variance 2,300 U Fixed Overhead Volume Variance 8,300 F

Sales Revenue (at standard) Cost of Goods Sold (at standard) $ 610,000 348,000 Direct Materials Cost Variance 1,500 F Direct Materials Efficiency Variance 6,600 F Direct Labor Cost Variance 4,200 U Direct Labor Efficiency Variance Variable Overhead Cost Variance Variable Overhead Efficiency Variance 2,700 F 2,800 U 1,100 U Fixed Overhead Cost Variance 2,300 U Fixed Overhead Volume Variance 8,300 F

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter8: Standard Cost Accounting—materials, Labor, And Factory Overhead

Section: Chapter Questions

Problem 23E: (Appendix) Calculating factory overhead: three variances Using the data given in E8-17, calculate...

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Question

Preparing a standard cost income statement

The May 2018 revenue and cost information for McDonald Outfitters, Inc. follows;

Prepare a standard cost income statement for management through gross profit Report all standard cost variances for management’s use. Has management done a good or poor job of controlling costs? Explain.

Sales Revenue (at standard)
Cost of Goods Sold (at standard)
$ 610,000
348,000
Direct Materials Cost Variance
1,500 F
Direct Materials Efficiency Variance
6,600 F
Direct Labor Cost Variance
4,200 U
Direct Labor Efficiency Variance
Variable Overhead Cost Variance
Variable Overhead Efficiency Variance
2,700 F
2,800 U
1,100 U
Fixed Overhead Cost Variance
2,300 U
Fixed Overhead Volume Variance
8,300 F

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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