Question

Slick Corporation is a small producer of synthetic motor oil. During May, the company produced 5,000 cases of lubricant. Eac contains 12 quarts of synthetic oil. To achieve this level of production, Slick purchased and used 16,500 gallons of direct mate cost of $20,449. It also incurred average direct labor costs of $13 per hour for the 4,115 hours worked in May by its productior personnel. Manufacturing overhead for the month totaled $9,569, of which $2,200 was considered fixed. Slick's standard co! information for each case of synthetic motor oil is as follows. Direct materials standard price Standard quantity allowed per case Direct labor standard rate Standard hours allowed per case Fixed overhead budgeted Normal level of production Variable overhead application rate Fixed overhead application rate ($2,600 = 5,200 cases) Total overhead application rate $ 1.30 per gallon 3.25 gallons $ 16 per hour 0.75 direct labor hours $2,600 per month 5,200 cases per month $ 1.50 per case 0.50 per case $ 2.00 per case Required: a. Compute the materials price and quantity variances. b. Compute the labor rate and efficiency variances. c. Compute the manufacturing overhead spending and volume variances. d. Prepare the journal entries to: 1. Charge materials (at standard) to Work in Process. 2. Charge direct labor (at standard) to Work in Process. 3. Charge manufacturing overhead (at standard) to Work in Process. 4. Transfer the cost of the 5,000 cases of synthetic motor oil produced in May to Finished Goods. 5. Close any over- or underapplied overhead to cost of goods sold. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Compute the materials price and quantity variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "O" for no effect (i.e., zero variance). Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.) Materials price variance Materials quantity variance

B:

C:

D:

Answer 1

Requirement 1
Actual Cost								Standard cost
AQ	*	AP		AQ	*	SP		SQ	*	SP
22220	*	$ 13.20		22220	*	$ 13.10		25760	*	$ 13.10
	$ 2,93,304.00				$ 2,91,082.00				$ 3,37,456.00
			$     2,222.00				$   46,374.00
Direct material price variance			$     2,222.00	Un Favourable
Direct material Quantity variance			$   46,374.00	Favourable
Total Direct Material variance			$   44,152.00	Favourable

Actual Cost								Standard cost
AH	*	AR		AH	*	SR		SH	*	SR
410	*	$ 20.60		410	*	$ 21.00		380	*	$ 21.00
	$                                 8,446.00				$ 8,610.00				$ 7,980.00
			$ (164.00)				$ 630.00
Direct Labour rate variance			$ (164.00)	Unfavourable
Direct labour efficiency variance			$ 630.00	favourable
Total Direct labour variance			$ 466.00	Unfavourable
	Labour Efficiency Variance =	Actual Hours * Standard Rate - Standard Hours * Standard Rate
		(410 Hours * $ 21 ) - (380 Hours *$21)
		$630	Unfavourable
	Option (D) is Correct
	Note : Standard hours For actual Output = 1900 units * 0.2hours per unit = 380 Hours