70.2K

Verified Solution

Link Copied!

%u201CIt certainly is nice to see that small variance on the income statement after all the trouble we%u2019ve had lately in controlling manufacturing costs,%u201D said Linda White, vice president of Molina Company. %u201CThe $12,250 overall manufacturing variance reported last period is well below the 3% limit we have set for variances. We need to congratulate everybody on a job well done.%u201D

The company produces and sells a single product. The standard cost card for the product follows:

Standard Cost Card%u2014Per Unit
Direct materials, 4 yards at $3.50 per yard	$	14.00
Direct labor, 1.5 direct labor-hours at $12.00 per direct labor-hour		18.00
Variable overhead, 1.5 direct labor-hours at $2.00 per direct labor-hour		3.00
Fixed overhead, 1.5 direct-labor hours at $6.00 per direct labor-hour		9.00
Standard cost per unit	$	44.00

The following additional information is available for the year just completed:

a.	The company manufactured 20,000 units of product during the year.

b.	A total of 78,000 yards of material was purchased during the year at a cost of $3.75 per yard. All of this material was used to manufacture the 20,000 units. There were no beginning or ending inventories for the year.

c.	The company worked 32,500 direct labor-hours during the year at a cost of $11.80 per hour.

d.	Overhead cost is applied to products on the basis of standard direct labor-hours. Data relating to manufacturing overhead costs follow:

Denominator activity level (direct labor-hours)		25,000
Budgeted fixed overhead costs	$	150,000
Actual fixed overhead costs	$	148,000
Actual variable overhead costs	$	68,250

Required:
1.	Compute the direct materials price and quantity variances for the year. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)

Direct materials quantity variance	$	(Click to select) F U None
Direct materials price variance	$	(Click to select) F U None

2.

Compute the direct labor rate and efficiency variances for the year. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)

Direct labor efficiency variance	$	(Click to select) F U None
Direct labor rate variance	$	(Click to select) F U None

3.	For manufacturing overhead, compute the following:

a.

The variable overhead rate and efficiency variances for the year. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)

Efficiency variance	$	(Click to select) F U None
Rate variance	$	(Click to select) F U None

b.

The fixed overhead budget and volume variances for the year. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)

Volume variance	$	(Click to select) F U None
Budget variance	$	(Click to select) F U None

Answer & Explanation Solved by verified expert

See Answer