Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single product are as follows: Materials (5 kilograms × $12.00/kilogram) = $60.00/unit; direct labor (3.5 hours/unit × $20.00/hour) = $70.00/unit. All materials are issued at the beginning of processing. The operating data shown below were taken from the records for December: In-process beginning inventory None In-process ending inventory—80% complete as to labor 960units Units completed during the period 6,700units Budgeted output 7,200units Purchases of materials (in kilograms) 40,000 Total actual direct labor cost incurred$528,410 Direct labor hours worked (AQ) 26,500hours Materials purchase-price variance$1,600favorable Increase in materials inventory in December 1,550kilograms The direct labor efficiency variance for December, to the nearest dollar, was:

Direct labor efficiency variance = (Actual hours worked × Standard rate) – (Standard hours allowed ×…

Answered: Shade Company adopted a standard cost…

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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Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single product are as follows: Materials (5 kilograms × $12.00/kilogram) = $60.00/unit; direct labor (3.5 hours/unit × $20.00/hour) = $70.00/unit. All materials are issued at the beginning of processing. The operating data shown below were taken from the records for December:


In-process beginning inventory		None
In-process ending inventory—80% complete as to labor		960	units
Units completed during the period		6,700	units
Budgeted output		7,200	units
Purchases of materials (in kilograms)		40,000
Total actual direct labor cost incurred	$	528,410
Direct labor hours worked (AQ)		26,500	hours
Materials purchase-price variance	$	1,600	favorable
Increase in materials inventory in December		1,550	kilograms

The direct labor efficiency variance for December, to the nearest dollar, was:

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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