Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)

16th Edition

ISBN: 9780134475585

Author: Srikant M. Datar, Madhav V. Rajan

Publisher: PEARSON

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Textbook Question

Chapter 7, Problem 7.29E

Price and efficiency variances, journal entries. The Schuyler Corporation manufactures lamps. It has set up the following standards per finished unit for direct materials and direct manufacturing labor:

Direct materials: 10 lb. at $4.50 per lb.	$45.00
Direct manufacturing labor: 0.5 hour at $30 per hour	15.00

The number of finished units budgeted for January 2017 was 10,000; 9,850 units were actually produced. Actual results in January 2017 were as follows:

Direct materials: 98,055 lb. used
Direct manufacturing labor: 4,900 hours	$154,350

Assume that there was no beginning inventory of either direct materials or finished units.

During the month, materials purchased amounted to 100,000 lb., at a total cost of $465,000. Input price variances are isolated upon purchase. Input-efficiency variances are isolated at the time of usage.

1. Compute the January 2017 price and efficiency variances of direct materials and direct manufacturing labor.
2. Prepare journal entries to record the variances in requirement 1.
3. Comment on the January 2017 price and efficiency variances of Schuyler Corporation.
4. Why might Schuyler calculate direct materials price variances and direct materials efficiency variances with reference to different points in time?

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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Chapter 7 Solutions

Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)

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...

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