Chapter 8, Problem 7P

Materials and labor variance analyses

The standard cost summary for the most popular product of Phenom Products Co. is shown as follows, together with production and cost data for the period.

One gallon each of liquid lead and varnish are added at the start of processing. The balance of the materials is added when the process is two-thirds complete. Labor and overhead are added evenly throughout the process. There were no units in process at the beginning of the month.

Required:

1. 1. Calculate equivalent production for materials, labor, and overhead. (Be sure to refer to the standard cost summary to help determine the percentage of materials in ending work in process.)
2. 2. Calculate materials and labor variances and indicate whether they are favorable or unfavorable, using the diagram format shown in Figure 8-4.
3. 3. Determine the cost of materials and labor in the work in process account at the end of the month.