Question

Maple Leaf Production manufactures truck tires. The following information is available for the last operating period.

• Maple Leaf produced and sold 90,000 tires for $46 each. Budgeted production was 94,000 tires.
• Standard variable costs per tire follow:

Direct materials: 4 pounds at $3.00	$	12.00
Direct labor: 0.55 hours at $19.00		10.45
Variable production overhead: 0.23 machine-hours at $15 per hour		3.45
Total variable costs	$	25.90

• Fixed production overhead costs:

Monthly budget $1,380,000

• Fixed overhead is applied at the rate of $16 per tire.
• Actual production costs:

Direct materials purchased and used: 385,000 pounds at $1.80	$	693,000
Direct labor: 45,000 hours at $19.30		868,500
Variable overhead: 22,000 machine-hours at $15.30 per hour		336,600
Fixed overhead		1,396,000

Required:

a. Prepare a cost variance analysis for each of the variable costs for Maple Leaf Productions. (Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

	Direct Materials Direct Labor Variable Overhead Actual costs Actual inputs at standard price Flexible budget Price variance Efficiency variance Cost variance

b. Prepare a fixed overhead cost variance analysis. (Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

	Total fixed overhead cost variance

c. (Appendix) Prepare the journal entries to record the activity for the last period using standard costing. Assume that all variances are closed to cost of goods sold at the end of the operating period. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Please use the form given so I don't get confused. Thank you!

Answer 1

ANSWER

a). Direct material:

Actual output	a	90000
Standard units per unit of output	b	4
Standard units of material required for actual output	c=a*b	360000
Standard quantity	Standard rate	Standard cost	Actual quantity	Actual rate	Actual cost
SQ	SP	SC	AQ	AP	AC
3,60,000.00	3.00	10,80,000.00	3,85,000.00	1.8	6,93,000.00
Total material cost/spending variance		SQ*SP - AQ*AP
		1080000-693000
		387000
		387000 F
Material price variance		AQ*(SP-AP)
		385000*(3-1.8)
		462000
		462000 F
Material usage/quantity variance		SP*(SQ-AQ)
		3*(360000-385000)
		-75000
		75000 U

Direct labor:

Particulars	Amount
Standard hours per unit	0.55
Actual output	90000
Standard labor hours for actual output	49500
Standard Hours	Standard rate	Standard cost	Actual Hours	Actual rate	Actual cost
SH	SR	SC	AH	AR	AC
49,500.00	19.00	9,40,500.00	45,000.00	19.30	8,68,500.00
Labor cost variance		SC-AC
		940500-868500
		72,000.00
		72000 F
Labor rate/Price variance		AH*(SR-AR)
		45000*(19-19.3)
		-13,500.00
		13500 U
Labor efficiency variance		SR*(SH-AH)
		19*(49500-45000)
		85,500.00
		85500 F

Variable overhead:

Particulars	Amount
Standard hours per unit	0.23
Actual output	90000
Standard labor hours for actual output	20700
Standard Hours	Standard rate	Standard cost	Actual Hours	Actual rate	Actual cost
SH	SR	SC	AH	AR	AC
20,700	15	3,10,500	22,000	15.30	3,36,600
VOH cost/Controllable variance		SC-AC
		310500-336600
		-26100
		26100 U
VOH rate variance		AH*(SR-AR)
		22000*(15-15.3)
		-6600
		6600 U
VOH efficiency variance		SR*(SH-AH)
		15*(20700-22000)
		-19500
		19500 U

b). Fixed overhead:

Budgeted units	Standard rate	Budgeted OH	Standard units	Standard rate	Overhead applied	Actual units	Actual rate	Actual cost
BU	SR	BC	SU	SR	SC	AU	AR	AC
86250	16	1380000	90000	16	1440000	90000	15.511	1396000
[1380000/16]
FOH cost variance		SC-AC
		1440000-1396000
		44000	44540
		44000 F
FOH cost volume variance		SR*(SU-BU)
		16*(90000-86250)
		60000
		60000 F
FOH expenditure/ /spending variance		BC-AC
		1380000-1396000
		-16000
		16000 U

c). Journal:

Account	Debit	Credit
Direct material inventory	11,55,000		[385000*3]
Accounts payable		6,93,000
Direct material price variance		4,62,000
[Direct material purchases recorded at standard rate]
Direct material inventory		11,55,000
Direct material usage variance	75,000
Finished goods inventory	10,80,000
[Direct material transfer to finished goods]
Finished goods inventory	9,40,500
Direct labor rate variance	13,500
Direct labor efficiency variance		85,500
Wages payable		8,68,500
[Direct labor expenses and variances recorded]
Variable manufacturing overhead incurred	3,36,600
Accounts payable		3,36,600
[Recording variable overhead]
Finished goods inventory	3,10,500
Variable manufacturing overhead applied		3,10,500
[Variable manufacturing overhead applied]
Variable manufacturing overhead applied	3,10,500
Variable manufacturing overhead incurred		3,36,600
Variable m/f overhead rate variance	6,600
Variable m/f overhead efficiency variance	19,500
[Recording variable overhead variances]
Fixed manufacturing overhead incurred	1396000
Accounts payable		1396000
[Recording Fixed overhead]
Finished goods inventory	1440000
Fixed manufacturing overhead applied		1440000
[Fixed manufacturing overhead applied]
Fixed manufacturing overhead applied	1440000
Fixed manufacturing overhead incurred		1396000
Fixed m/f volume variance		60000
Fixed m/f overhead expenditure variance	16000
[Recording Fixed overhead variances]
Finished goods inventory	37,71,000
Cost of goods sold		37,71,000
[Transfer of finished goods to cost of goods sold]
Direct material price variance	4,62,000
Direct material usage variance		75,000
Direct labor rate variance		13,500
Direct labor efficiency variance	85,500
Variable m/f overhead rate variance		6,600
Variable m/f overhead efficiency variance		19,500
Fixed m/f volume variance	60,000
Fixed m/f overhead expenditure variance		16,000
Cost of goods sold		4,76,900

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