Trueform Products, Inc., produces a broad line of sports equipment and uses a standard cost system forcontrol purposes. Last year the company produced 8,000 varsity footballs. The standard costs associatedwith this football, along with the actual costs incurred last year, are given below (per football):Standard ActualCost CostDirect materials:Standard: 3.7 feet at $5.00 per foot .................... $18.50Actual: 4.0 feet at $4.80 per foot ......................... $19.20Direct labor:Standard: 0.9 hours at $7.50 per hour ................ 6.75Actual: 0.8 hours at $8.00 per hour ..................... 6.40Variable manufacturing overhead:Standard: 0.9 hours at $2.50 per hour ................ 2.25Actual: 0.8 hours at $2.75 per hour ..................... 2.20Total cost per football ............................................. $27.50 $27.80The president was elated when he saw that actual costs exceeded standard costs by only $0.30 per football.He stated, “I was afraid that our unit cost might get out of hand when we gave out those raises last year inorder to stimulate output. But it’s obvious our costs are well under control.”There was no inventory of materials on hand to start the year. During the year, 32,000 feet of materialswere purchased and used in production.Required:1. For direct materials:a. Compute the price and quantity variances for the year.b. Prepare journal entries to record all activity relating to direct materials for the year.2. For direct labor:a. Compute the rate and efficiency variances.b. Prepare a journal entry to record the incurrence of direct labor cost for the year.3. Compute the variable overhead rate and efficiency variances.4. Was the president correct in his statement that “our costs are well under control”? Explain.5. State possible causes of each variance that you have computed.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Trueform Products, Inc., produces a broad line of sports equipment and uses a
control purposes. Last year the company produced 8,000 varsity footballs. The standard costs associated
with this football, along with the actual costs incurred last year, are given below (per football):
Standard Actual
Cost Cost
Direct materials:
Standard: 3.7 feet at $5.00 per foot .................... $18.50
Actual: 4.0 feet at $4.80 per foot ......................... $19.20
Direct labor:
Standard: 0.9 hours at $7.50 per hour ................ 6.75
Actual: 0.8 hours at $8.00 per hour ..................... 6.40
Variable manufacturing
Standard: 0.9 hours at $2.50 per hour ................ 2.25
Actual: 0.8 hours at $2.75 per hour ..................... 2.20
Total cost per football ............................................. $27.50 $27.80
The president was elated when he saw that actual costs exceeded standard costs by only $0.30 per football.
He stated, “I was afraid that our unit cost might get out of hand when we gave out those raises last year in
order to stimulate output. But it’s obvious our costs are well under control.”
There was no inventory of materials on hand to start the year. During the year, 32,000 feet of materials
were purchased and used in production.
Required:
1. For direct materials:
a. Compute the price and quantity variances for the year.
b. Prepare journal entries to record all activity relating to direct materials for the year.
2. For direct labor:
a. Compute the rate and efficiency variances.
b. Prepare a
3. Compute the variable overhead rate and efficiency variances.
4. Was the president correct in his statement that “our costs are well under control”? Explain.
5. State possible causes of each variance that you have computed.
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