/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q33PGB Computing and journalizing stand... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 23: Q33PGB (page 1319)

Computing and journalizing standard cost variances

Middleton manufactures coffee mugs that it sells to other companies for customizing with their own logos. Middleton prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 59,800 coffee mugs per month:

Direct Materials (0.2 lbs. @ \(0.25 per lb.) \) 0.05

Direct Labor (3 minutes @ \(0.14 per minute) 0.42

Manufacturing Overhead:

Variable (3 minutes @ \)0.06 per minute) \( 0.18

Fixed (3 minutes @ \)0.13 per minute) 0.39 0.57

Total Cost per Coffee Mug \( 1.04

Actual cost and production information for July 2018 follows:

a. There were no beginning or ending inventory balances. All expenditures were on account.

b. Actual production and sales were 62,500 coffee mugs.

c. Actual direct materials usage was 11,000 lbs. at an actual cost of \)0.17 per lb.

d. Actual direct labor usage of 197,000 minutes at a cost of \(33,490.

e. Actual overhead cost was \)10,835 variable and \(29,965 fixed.

f. Selling and administrative costs were \)130,000.

Requirements

1. Compute the cost and efficiency variances for direct materials and direct labor.

2. Journalize the purchase and usage of direct materials and the assignment of direct

labor, including the related variances.

3. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances.

4. Journalize the actual manufacturing overhead and the allocated manufacturing overhead. Journalize the movement of all production from Work in Process Inventory. Journalize the adjusting of the Manufacturing Overhead account.

5. Middleton intentionally hired more highly skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise?

Short Answer

Expert verified
  1. Direct material cost variance and direct material efficiency variances depict a favourable balance.
  2. Wages payable =$33,490
  3. Variable overhead cost variance and fixed overhead volume variance depict a favourable balance
  4. Fixed overhead cost variance = $6,643
  5. Middleton made apoor choice by hiring more skilled direct labourers.

Step by step solution

01

Meaning of WIP Inventory

Work-in-process (WIP) depicts a stock thing that鈥檚 only somewhat finished. On the off chance that the company is manufacturing tangible products instead of rendering services, the value of that mostly completed stock may moreover show up on the balance sheet as the product in the process.

02

(1) computing the cost and efficiency variances

Direct material cost variance

顿颈谤别肠迟鈥刴补迟别谤颈补濒鈥刢辞蝉迟鈥剉补谤颈补苍肠别=础肠迟耻补濒鈥剄耻补苍迟颈迟测脳础肠迟耻补濒鈥刾谤颈肠别鈭�础肠迟耻补濒鈥剄耻补苍迟颈迟测脳厂迟补苍诲补谤诲鈥刾谤颈肠别=础肠迟耻补濒鈥堑耻补苍迟颈迟测脳础肠迟耻补濒鈥塸谤颈肠别鈭�厂迟补苍诲补谤诲鈥塸谤颈肠别=11,000脳$0.17鈭�$0.25=$880鈥凢补惫辞耻谤补产濒别

Direct material efficiency variance

厂迟补苍诲补谤诲鈥剄耻补苍迟颈迟测=厂迟补苍诲补谤诲鈥剄耻补苍迟颈迟测鈥刾er鈥剈nit脳础肠迟耻补濒鈥刾谤辞诲耻肠迟颈辞苍=0.20脳62,500=12,500

顿颈谤别肠迟鈥刴补迟别谤颈补濒鈥别蹿蹿颈肠颈别苍肠测鈥剉补谤颈补苍肠别=础肠迟耻补濒鈥剄耻补苍迟颈迟测鈭�厂迟补苍诲补谤诲鈥剄耻补苍迟颈迟测脳厂迟补苍诲补谤诲鈥刾谤颈肠别=11,000鈭�12,500脳$0.25=$375鈥凢补惫辞耻谤补产濒别

Direct labor cost variance

础肠迟耻补濒鈥剅补迟别=础肠迟耻补濒鈥剅补迟别础肠迟耻补濒鈥刣颈谤别肠迟鈥刲补产辞谤鈥剈蝉补驳别=$33,490197,000=$0.17

顿颈谤别肠迟鈥刲补产辞谤鈥刢辞蝉迟鈥剉补谤颈补苍肠别=础肠迟耻补濒鈥刢辞蝉迟鈭�Standard鈥嬧�刢辞蝉迟鈥刼f鈥劥〕Τ俪懿贡翕�刢辞蝉迟=$33,490鈭�197,000脳$0.14=$5,910鈥刄苍蹿补惫辞耻谤补产濒别

Direct labor efficiency variance

厂迟补苍诲补谤诲鈥则颈尘别鈥刟濒濒辞飞别诲=厂迟补苍诲补谤诲鈥刴颈苍耻迟别蝉脳础肠迟耻补濒鈥刾谤辞诲耻肠迟颈辞苍=3脳62,500=187,000

顿颈谤别肠迟鈥刲补产辞谤鈥别蹿蹿颈肠颈别苍肠测鈥剉补谤颈补苍肠别=础肠迟耻补濒鈥删辞耻谤蝉脳厂迟补苍诲补谤诲鈥塺补迟别鈭�厂迟补苍诲补谤诲鈥删辞耻谤蝉脳厂迟补苍诲补谤诲鈥剅补迟别=197,000脳$0.14鈭�187,500脳$0.14=$1,330鈥刄苍蹿补惫辞耻谤补产濒别


03

(2) Preparing journal entries

Date

Particulars

Debit ($)

Credit ($)

Direct material inventory

2,750

Accounts payable 11,000脳$0.17

1,870

Direct materials price variance

880

Work-in-progress inventory

3,125

Direct materials efficiency variance

375

Raw materials Inventory

2,750

Journal entries to record labour transaction

Date

Particulars

Debit ($)

Credit ($)

Work-in-process inventory

26,250

Direct labor cost variance

5,910

Direct labor efficiency variance

1,330

Wages payable

33,490

04

(3) Computing the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances

Variable overhead efficiency variance

痴补谤颈补产濒别鈥刼惫别谤丑别补诲鈥别蹿蹿颈肠颈别苍肠测鈥剉补谤颈补苍肠别=础肠迟耻补濒鈥剄耻补苍迟颈迟测鈭�厂迟补苍诲补谤诲鈥剄耻补苍迟颈迟测脳厂迟补苍诲补谤诲鈥刢辞蝉迟=197,000鈭�187,500脳$0.06=$570鈥刄苍蹿补惫辞耻谤补产濒别

Variable overhead cost variance

痴补谤颈补产濒别鈥刼惫别谤丑别补诲鈥刢辞蝉迟鈥剉补谤颈补苍肠别=础肠迟耻补濒鈥刢辞蝉迟鈥�鈭�础肠迟耻补濒鈥删辞耻谤蝉脳厂迟补苍诲补谤诲鈥嬧赌刾谤颈肠别=$10,835鈭�197,000脳$0.06=$985鈥凢补惫辞耻谤补产濒别

Allocated fixed overhead

础濒濒辞肠补迟别诲鈥刦颈虫别诲鈥刼惫别谤丑别补诲=厂迟补苍诲补谤诲鈥刦颈虫别诲鈥刼惫别谤丑别补诲鈥刟濒濒辞肠补迟颈辞苍鈥剅补迟别脳厂迟补苍诲补谤诲鈥剄耻补苍迟颈迟测=$0.13脳3脳62,500=$24,375

Fixed overhead cost variance

Fixed鈥�overhead鈥刢辞蝉迟鈥�variance=础肠迟耻补濒鈥刦颈虫别诲鈥刼惫别谤丑别补诲鈭�叠耻诲驳别迟别诲鈥刦颈虫别诲鈥刼惫别谤丑别补诲=$29,965鈭�$23,222=$6,643鈥刄苍蹿补惫辞耻谤补产濒别

Fixed overhead volume variance

贵颈虫别诲鈥刼惫别谤丑别补诲鈥剉辞濒耻尘别鈥剉补谤颈补苍肠别=叠耻诲驳别迟别诲鈥刦颈虫别诲鈥刼惫别谤丑别补诲鈭�础濒濒辞肠补迟别诲鈥刦颈虫别诲鈥刼惫别谤丑别补诲=$23,322鈭�$24,375=$1,053鈥凢补惫辞耻谤补产濒别

05

(4) Preparing journal entries

Date

Particulars

Debit ($)

Credit ($)

Manufacturing overhead $29,965+$10,835

40,800

Various accounts

40,800

Work-in-process inventory 62,500脳$0.57

35,625

Manufacturing overhead

35,625

Finished goods inventory 62,500脳$1.04

65,000

Work-in-process inventory

65,000

Fixed overhead cost variance

6,643

Variable overhead efficiency variance

570

Variable overhead cost variance

985

Fixed overhead volume variance

1,053

Manufacturing overhead

5,175

06

(5) Explaining the decision that affects cost variance.

The rate of skilled people employed by MT Company is high. Actual labour costs per minute are $0.17, which is more than the average rate of $0.14. Higher actual costs resulted, which is not advantageous to the company.

Additionally, efficient work is anticipated to be produced by skilled individuals. Nevertheless, the actual hours used (197,000) exceeded the permitted hours (187,500).

The outcome of the decision was foolish, and the unfavourable variance shows that the business could not manage expenditures within the acceptable range.

The MT Company's choice to hire more skilled personnel led to a $3,940 unfavourable change in direct labour costs.

The direct labour efficiency variation also had a negative impact of $1,045.

Overall, the decision MT Company made was unwise.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Question:Match the variance to the correct definition.

Variance Definition

2. Cost variance

3. Efficiency variance

4. Flexible budget variance

5. Sales volume variance

6. Static budget variance

a. The difference between the expected results in the flexible budget for the actual units sold and the static budget.

b. The difference between actual results and the expected results in the flexible budget for the actual units sold.

c. Measures how well the business keeps unit costs of material and labor inputs within standards.

d. The difference between actual results and the expected results in the static budget.

e. Measures how well the business uses its materials or human resources

Murphy Company managers received the following incomplete performance report:

Units Actual Results Flexible Budget Variance Static Budget Flexible Budget Sales Volume Variance Sales Revenue Contribution Margin Fixed Expenses Operating Income 35,000 (a) (b) 5,000 F \( 29,000 \) 14,000 105,000 0 \( 219,000 \) 27,000 F 85,000 13,000 MURPHY COMPANY Flexible Budget Performance Report For the Year Ended July 31, 2018 134,000 14,000 35,000 \( 35,000 100,000 \) 219,000 84,000 135,000 (c) (d) (e) (f) (h) (g) (i) (j) (k) (l)

Complete the performance report. Identify the employee group that may deserve praise and the group that may be subject to criticism. Give your reasoning.

Martin, Inc. manufactures lead crystal glasses. The standard direct labor time is 0.5 hours per glass, at a cost of \(18 per hour. The actual results for one month鈥檚 production of 6,500 glasses were 0.2 hours per glass, at a cost of \)11 per hour. Calculate the direct labor cost variance and the direct labor efficiency variance.

Martin, Inc. is a manufacturer of lead crystal glasses. The standard direct materialsquantity is 1.0 pound per glass at a cost of \(0.50 per pound. The actual result for onemonth鈥檚 production of 6,500 glasses was 1.2 pounds per glass, at a cost of \)0.30 perpound. Calculate the direct materials cost variance and the direct materials efficiencyvariance.

What is a variance?
See all solutions

Recommended explanations on Business Studies Textbooks

Introduction to Business

Read Explanation

International Business

Read Explanation

Strategic Direction

Read Explanation

Organizational Behavior

Read Explanation

Public Relations Business Studies

Read Explanation

Project Planning & Management

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.