Question

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

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!

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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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