COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
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Chapter 7, Problem 7.28E
Direct materials and direct manufacturing labor variances. Rugged Life, Inc., designs and manufactures fleece quarter-zip jackets. It sells its jackets to brand-name outdoor outfitters in lots of one dozen. Rugged Life’s May 2017 static budget and actual results for direct inputs are as follows:
| Static Budget | |
| Number of jacket lots (1 lot = 1 dozen) | 300 |
| Per Lot of Jackets: | |
| Direct materials | 18 yards at $4.65 per yard = $83.70 |
| Direct manufacturing labor | 2.4 hours at $12.50 per hour = $30.00 |
| Actual Results | |
| Number of jacket lots sold | 325 |
| Total Direct Inputs: | |
| Direct materials | 6,500 yards at $4.85 per yard = $31,525 |
| Direct manufacturing labor | 715 hours at $12.60 = $9,009 |
Rugged Life has a policy of analyzing all input variances when they add up to more than 8% of the total cost of materials and labor in the flexible budget, and this is true in May 2017. The production manager discusses the sources of the variances: “A new type of material was purchased in May. This led to faster cutting and sewing, but the workers used more material than usual as they learned to work with it. For now, the standards are fine.”
- 1. Calculate the direct materials and direct manufacturing labor price and efficiency variances in May 2017. What is the total flexible-
budget variance for both inputs (direct materials and direct manufacturing labor) combined? What percentage is this variance of the total cost of direct materials and direct manufacturing labor in the flexible budget? - 2. Comment on the May 2017 results. Would you continue the “experiment” of using the new material?
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Safeflower Systems allocates manufacturing overhead based on machine hours.
Each connector should require 13 machine hours. According to the static budget,
Safeflower expected to incur the following:
(Click the icon to view the static budget information.)
During August, Safeflower actually used 500 machine hours to make 86 connectors
and spent $5,300 in variable manufacturing costs and $9,100 in fixed manufacturing
overhead costs. Calculate the variable overhead cost variance for Safeflower.
A. $290 F
OB. $2,800 U
OC. $5,890 F
O-D. $3,090 F
Data Table
1,300 machine hours per month (100 connectors x 13 machine hours per
connector)
$6,500 in variable manufacturing overhead costs
$7,535 in fixed manufacturing overhead costs
Print
Done
X
Ruth Dee, Inc. designs and manufactures fleece quarter-zip jackets. It sells its jackets to brand-name outdoor outfitters in lots of one dozen. Ruth Dee's May 2017 static budget and actual results for direct inputs are as follows:
Static Budget
Number of jacket lots (1 lot = 1 dozen)
400
Per Lot of Jackets:
Direct materials
14 yards at $1.40 per yard = $19.60
Direct manufacturing labor
1.5 hours at $8.50 per hour = $12.75
Actual Results
Number of jacket lots sold
425
Total Direct Inputs:
Direct materials
6,800 yards at $1.60 per yard = $10,880.00
Direct manufacturing labor
553 hours at $8.60 per hour = $4,755.80
Ruth Dee has a policy of analyzing all input variances when they add up to more than 8% of the total cost of materials and labor in the flexible budget, and this is true in May 2017. The production manager discusses the sources of the variances: "A new type of material was purchased in May. This led to faster cutting and sewing, but the workers used more material than…
Radiant Systems allocates manufacturing overhead based on machine hours. Each connector should require 13 machine hours. According to the static budget, Radiant expected to incur
the following
(Click the icon to view the static budget Information.)
During August, Radiant actually used 400 machihe hours to make 130 connectors and spent $5,500 in variable manufacturing costs and $9,100 in fixed manufacturing overhead costs.
Calculate the variable overhead cost variance for Radiant
OA. $2,850 F
OB. $6,450 F
Data table
Oc. $9,950 F
OD. $3,500 U
1,300 machine hours per month (100 connectors x 13 machine hours per
connector
$6,500 in variable manufacturing overhead costs
$7,535 in fixed manufacturing overhead costs
Print
Done
- X
Chapter 7 Solutions
COST ACCOUNTING
Ch. 7 - What is the relationship between management by...Ch. 7 - What are two possible sources of information a...Ch. 7 - Distinguish between a favorable variance and an...Ch. 7 - What is the key difference between a static budget...Ch. 7 - Why might managers find a flexible-budget analysis...Ch. 7 - Describe the steps in developing a flexible...Ch. 7 - List four reasons for using standard costs.Ch. 7 - How might a manager gain insight into the causes...Ch. 7 - List three causes of a favorable direct materials...Ch. 7 - Describe three reasons for an unfavorable direct...
Ch. 7 - How does variance analysis help in continuous...Ch. 7 - Why might an analyst examining variances in the...Ch. 7 - Prob. 7.13QCh. 7 - When inputs are substitutable, how can the direct...Ch. 7 - Benchmarking against other companies enables a...Ch. 7 - Metal Shelf Companys standard cost for raw...Ch. 7 - All of the following statements regarding...Ch. 7 - Amalgamated Manipulation Manufacturings (AMM)...Ch. 7 - Atlantic Company has a manufacturing facility in...Ch. 7 - Basix Inc. calculates direct manufacturing labor...Ch. 7 - Flexible budget. Sweeney Enterprises manufactures...Ch. 7 - Flexible budget. Bryant Companys budgeted prices...Ch. 7 - Flexible-budget preparation and analysis. Bank...Ch. 7 - Flexible budget, working backward. The Clarkson...Ch. 7 - Flexible-budget and sales volume variances....Ch. 7 - Price and efficiency variances. Sunshine Foods...Ch. 7 - Materials and manufacturing labor variances....Ch. 7 - Direct materials and direct manufacturing labor...Ch. 7 - Price and efficiency variances, journal entries....Ch. 7 - Materials and manufacturing labor variances,...Ch. 7 - Journal entries and T-accounts (continuation of...Ch. 7 - Price and efficiency variances, benchmarking....Ch. 7 - Static and flexible budgets, service sector....Ch. 7 - Flexible budget, direct materials, and direct...Ch. 7 - Variance analysis, nonmanufacturing setting. Joyce...Ch. 7 - Comprehensive variance analysis review. Ellis...Ch. 7 - Possible causes for price and efficiency...Ch. 7 - Material-cost variances, use of variances for...Ch. 7 - Direct manufacturing labor and direct materials...Ch. 7 - Direct materials efficiency, mix, and yield...Ch. 7 - Direct materials and manufacturing labor...Ch. 7 - Direct materials and manufacturing labor...Ch. 7 - Use of materials and manufacturing labor variances...Ch. 7 - Direct manufacturing labor variances: price,...Ch. 7 - Direct-cost and selling price variances. MicroDisk...Ch. 7 - Variances in the service sector. Derek Wilson...Ch. 7 - Prob. 7.47P
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