Principles of Cost Accounting
17th Edition
ISBN: 9781305087408
Author: Edward J. Vanderbeck, Maria R. Mitchell
Publisher: Cengage Learning
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Chapter 8, Problem 12P
Two-variance
The standard specifications for an electric motor manufactured by XYZ Electric Co. follow:
Factory overhead rates are based on a normal 70% capacity and use the following flexible budget:
The actual production was 2,500 motors, and
Required:
Calculate the factory overhead variances using the two-variance method and the diagram format.
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Compute for the variances of the problem using the information given. Answer the numbers only up to two decimal places.
A. Compute for Labor Efficiency Variance
B. Compute for Labor Spending Variance
C. Compute for Labor Rate Variance
please answer all requirements or skip/leave answer with must must explanation , computation for each parts and steps clearly and completely answer in text form remember attempt if answer all or skip
Pickul Awning manufactures awnings and uses a standard cost system. The company allocates overhead based on the number of direct labor hours. The following are the
company's cost and standards data:
(Click the icon to view the standards.)
Requirement 1. Calculate the standard cost of one awning.
Standard cost
Direct materials
Direct labor
Variable MOH
Fixed MOH
Total standard cost
Standard cost per unit
Requirement 2a. Calculate the direct material variances. (Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variance as fa
First determine the formula for the price variance, then compute the price variance for direct materials.
Determine the formula for the quantity variance, then compute the quantity variance for direct materials.
= DM price variance
) =
First determine the formula for the efficiency variance, then compute the efficiency variance for direct labor.
x(
x(
x (
x(
= DM quantity…
Chapter 8 Solutions
Principles of Cost Accounting
Ch. 8 - How does a standard cost accounting system work,...Ch. 8 - What is the difference between the standard cost...Ch. 8 - Prob. 3QCh. 8 - What are the specific procedures on which a...Ch. 8 - How are standards for materials and labor costs...Ch. 8 - What is a variance?Ch. 8 - How do price and quantity variances relate to...Ch. 8 - How do rate and efficiency variances relate to...Ch. 8 - Prob. 9QCh. 8 - How does a materials purchase price variance...
Ch. 8 - Prob. 11QCh. 8 - Prob. 12QCh. 8 - When a company uses a standard cost system, are...Ch. 8 - What two factors must be considered when breaking...Ch. 8 - What might cause the following materials...Ch. 8 - What might cause the following labor variances?
An...Ch. 8 - Prob. 17QCh. 8 - Prob. 18QCh. 8 - Prob. 19QCh. 8 - Prob. 20QCh. 8 - When does a flexible-budget variance occur?
Ch. 8 - Why is it important to determine flexible-budget...Ch. 8 - Prob. 23QCh. 8 - What is the significance of a production-volume...Ch. 8 - If production is more or less than the standard...Ch. 8 - At the end of the current fiscal year, the trial...Ch. 8 - What variances from the four-variance method are...Ch. 8 - What is the primary difference between the...Ch. 8 - What are the four variances in the four-variance...Ch. 8 - In all of the exercises involving variances, use F...Ch. 8 - Prob. 2ECh. 8 - Prob. 3ECh. 8 - Prob. 4ECh. 8 - Prob. 5ECh. 8 - Computing materials variances D-List Calendar Co....Ch. 8 - Computing labor variances LIFT Inc. manufactures...Ch. 8 - Standard cost summary; materials and labor cost...Ch. 8 - Computing labor variances Fill in the missing...Ch. 8 - Standard unit cost and journal entries The normal...Ch. 8 - Making journal entries Assume that during the...Ch. 8 - Using variance analysis and interpretation Last...Ch. 8 - Using variance analysis and interpretation Last...Ch. 8 - Journalizing standard costs in two departments...Ch. 8 - Calculating factory overhead The standard capacity...Ch. 8 - Determining Budgeted Overhead The overhead...Ch. 8 - Calculating factory overhead: two variances Munoz...Ch. 8 - Calculating factory overhead: two variances...Ch. 8 - The normal capacity of a manufacturing plant is...Ch. 8 - Calculating amount of factory overhead applied to...Ch. 8 - Georgia Gasket Co. budgets 8,000 direct labor...Ch. 8 - (Appendix) Calculating factory overhead: four...Ch. 8 - (Appendix) Calculating factory overhead: three...Ch. 8 - Materials and labor variances Branca Inspections...Ch. 8 - Materials and labor variances Fausto Fabricators...Ch. 8 - Zippy Inc. manufactures a fuel additive, Surge,...Ch. 8 - Calculation of materials and labor variances
Fritz...Ch. 8 - High-End Products Inc. uses a standard cost system...Ch. 8 - RDI Products Co. manufactures a variety of...Ch. 8 - The standard cost summary for the most popular...Ch. 8 - Carlo Lee Corp. has established the following...Ch. 8 - USD Inc. has established the following standard...Ch. 8 - Allocation of variances
Costa Brava Manufacturing...Ch. 8 - On May 1, Athens Inc. began the manufacture of a...Ch. 8 - The standard specifications for an electric motor...Ch. 8 - Cardiff Inc. manufactures men’s sport shirts for...Ch. 8 - Fargo Co. manufactures products in batches of 100...Ch. 8 - Prob. 15PCh. 8 - (Appendix) Overhead variances—four variance
Mobile...Ch. 8 - Shinto Corp. uses a standard cost system and...Ch. 8 - Kamen Manufacturing Co. estimates the following...Ch. 8 - Prob. 19PCh. 8 - Jillian Manufacturing Inc. manufactures a single...Ch. 8 - Cost and production data for Binghamton Beverages...
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- Direct materials, direct labor, and factory overhead cost variance analysis Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 40,000 units of product were as follows: Each unit requires 0.3 hour of direct labor. Instructions Determine (A) the direct materials price variance, direct materials quantity variance, and total direct materials cost variance; (B) the direct labor rate variance, direct labor time variance, and total direct labor cost variance; and (C) the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance.arrow_forwardAt the beginning of the year, Lopez Company had the following standard cost sheet for one of its chemical products: Lopez computes its overhead rates using practical volume, which is 80,000 units. The actual results for the year are as follows: (a) Units produced: 79,600; (b) Direct labor: 158,900 hours at 18.10; (c) FOH: 831,000; and (d) VOH: 112,400. Required: 1. Compute the variable overhead spending and efficiency variances. 2. Compute the fixed overhead spending and volume variances.arrow_forwardGeorgia Gasket Co. budgets 8,000 direct labor hours for the year. The total overhead budget is expected to amount to 20,000. The standard cost for a unit of the companys product estimates the variable overhead as follows: The actual data for the period follow: Using the four-variance method, calculate the overhead variances. (Hint: First compute the budgeted fixed overhead rate.)arrow_forward
- Direct materials and direct labor variance analysis Lenni Clothing Co. manufactures clothing in a small manufacturing facility. Manufacturing has 25 employees. Each employee presently provides 40 hours of productive labor per week. Information about a production week is as follows: Instructions Determine (A) the standard cost per unit for direct materials and direct labor; (B) the price variance, quantity variance, and total direct materials cost variance; and (C) the rate variance, time variance, and total direct labor cost variance.arrow_forwardDelano Company uses two types of direct labor for the manufacturing of its products: fabricating and assembly. Delano has developed the following standard mix for direct labor, where output is measured in number of circuit boards. During the second week in April, Delano produced the following results: Required: 1. Calculate the yield ratio. 2. Calculate the standard cost per unit of the yield. 3. Calculate the direct labor yield variance. 4. Calculate the direct labor mix variance.arrow_forwardRefer to Cornerstone Exercise 8.13. In March, Nashler Company produced 163,200 units and had the following actual costs: Required: 1. Prepare a performance report for Nashler Company comparing actual costs with the flexible budget for actual units produced. 2. What if Nashler Companys actual direct materials cost were 1,175,040? How would that affect the variance for direct materials? The total cost variance?arrow_forward
- Kamen Manufacturing Co. estimates the following labor and overhead costs for the period: Required: Use the four-variance method for overhead analysis. Calculate the variances for direct labor and overhead. Prove that the overhead variances equal over- or underapplied factory overhead for the period.arrow_forwardThe normal capacity of a manufacturing plant is 30,000 direct labor hours or 20,000 units per month. Standard fixed costs are 6,000, and variable costs are 12,000. Data for two months follow: For each month, make a single journal entry to charge overhead to Work in Process, to close Factory Overhead, and to record variances. Indicate the types of variances and state whether each is favorable or unfavorable. (Hint: You must first compute the flexible-budget and production-volume variances.)arrow_forwardDirect materials, direct labor, and factory overhead cost variance analysis Road Gripper Tire Co. manufactures automobile tires. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 4,160 tires were as follows: Instructions Determine (A) the direct materials price variance, direct materials quantity variance, and total direct materials cost variance; (B) the direct labor rate variance, direct labor time variance, and total direct labor cost variance; and (C) the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance.arrow_forward
- Mulliner Company showed the following information for the year: Required: 1. Calculate the standard direct labor hours for actual production. 2. Calculate the applied variable overhead. 3. Calculate the total variable overhead variance.arrow_forwardRath Company showed the following information for the year: Required: 1. Calculate the standard direct labor hours for actual production. 2. Calculate the applied variable overhead. 3. Calculate the total variable overhead variance.arrow_forwardCost and production data for Binghamton Beverages Inc. are presented as follows: Required: Calculate net variances for materials, labor, and factory overhead. Calculate specific materials and labor variances by department, using the diagram format in Figure 8-4. Comment on the possible causes for each of the variances that you computed. Make all journal entries to record production costs in Work in Process and Finished Goods. Determine the balance of ending Work in Process in each department. Assume that 4,000 units were sold at $40 each. Calculate the gross margin based on standard cost. Calculate the gross margin based on actual cost. Why does the gross margin at actual cost differ from the gross margin at standard cost. As the plant controller, you present the variance report in Item 1 above to Paul Crooke, the plant manager. After reading it, Paul states: “If we present this performance report to corporate with that large unfavorable labor variance in Blending, nobody in the plant will receive a bonus. Those standard hours of 5,500 are way too tight for this production process. Fifty-eight hundred hours would be more reasonable, and that would result in a favorable labor efficiency variance that would more than offset the unfavorable labor rate variance. Please redo the variance calculations using 5,800 hours as the standard.” You object, but Paul ends the conversation with, “That is an order.” What standards of ethical professional practice would be violated if you adhered to Paul’s order? How would you attempt to resolve this ethical conflict?arrow_forward
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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY