Question

1. The normal capacity of the Malloy Company is 20,000 direct labor hours and 10,000 units per month. A finished unit requires 15 pounds of materials at an estimated cost of $1.00 per pound. The estimated cost of labor is $12.00 per hour. It is estimated that overhead for a month will be $15,000. During the month of June, 19,000 direct labor hours were worked at an average rate of $11.50 an hour. The number of units produced was 9,000, using all 132,000 pounds of material that were purchased at a cost of $1.05 per pound. a. Prepare a standard cost summary showing the standard unit cost. b. Calculate the material and labor variances. 1. Prepare entries in general journal form to charge materials and labor to work in process. Indicate whether the variances are favorable or unfavorable.

Answer 1

| Solution Cost Standard Porticulars Summary (fur 9000 units) Cost per una ) Totel last (1) 15.00 135,000 Direct metorials (9000 x 15 x 1) Direct labour [620,000 x 9000012 1 12 24.60 10000 216,000 1.62 Overhead Total 15,000 366,000 cost Material variances!.. 1 Materal Cost Variance = = = grd. Costa Acehead lost 135,000 - (132,000 X 1.05) $3,600 Confavourable) Material Rate Variance = (std Rate - AeRate ) x fc. Qty. = (1.00-1.05) * 132,000 = $6,600 (un favourable Material Vorionce usage = (ste. gry - Actual gy) x std Rate = ((1589000) – 132.000) * I = $ 3000 (favourable)

Labour Noriance wl Labour Cast Variance = 31. Cost - Actual cast = 216,000- (19000X 11.50) = $2,500 (unfavourable) ro | labour Rate variance = (st. Rate - Me. Rate) x Aek. Hours = (12.00 - - $9,500 11.50) x 19000 (lovourable labour Efficiency Variance (Std. hours - Actual houn) a Sto Ride ={(9000 42) – 19000 7 x 12 = $12000 ( un favourable) Credit ($) Journal Debit (3) work-in - Progress 357,100 Direct matériels (132,000 X 1.05) Diect la bours (19,000 x 11.50) 138,600 218,500