J&W Corporation manufactures a new electronic game console. The current standard cost sheet for a game console follows:
Direct materials, ? kilograms at $6 per kilogram | $ | ? | per game |
Direct labor, 0.75 hours at ? per hour | ? | per game | |
Overhead, 0.75 hours at ? per hour | ? | per game | |
Total costs | $ | 39 | per game |
Assume that the following data appeared in J&W’s records at the end of the past month:
Actual production | 58,000 | units | |
Actual sales | 55,000 | units | |
Materials (132,000 kilograms) | $ | 851,000 | |
Materials price variance | 59,000 | U | |
Materials efficiency variance | 43,800 | U | |
Direct labor price variance | 32,800 | U | |
Direct labor (41,000 hours) | 754,400 | ||
Underapplied overhead (total) | 20,000 | U | |
There are no materials inventories.
Required:
a. Complete the standard cost sheet for a game console given below. Compute the direct labor efficiency variance. (Do not round intermediate calculations. Round your answers to 2 decimal places. 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.)
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b. Assume that all production overhead is fixed and that the $20,000 underapplied is the only overhead variance that can be computed. What are the actual and applied overhead amounts?
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a.
Direct materials | $2.15 | kilograms at $6 per kilogram | 12.9 | per game |
Direct labor, 0.75 hours at | $17.60 | per hour | 13.2 | per game |
Overhead, 0.75 hours at | $17.20 | per hour | 12.9 | per game |
Total costs | $39 | per game |
Direct labor: | ||
Efficiency variance | $44,000 | F |
Working:
Material efficiency variance = $43,800 U |
Actual price of material = $851,000 / 132000 kd = $6.44696 per kg |
Actual quantity of material = 132000 Kg |
Standard price of material = $6 per kg |
(SQ - AQ) * SP = -$43,800 |
(SQ - 132000) * $6 = -$43,800 |
SQ = 124700 Kg |
Actual production = 58000 units |
Standard quantity of material per Kg = 124700 / 58000 = 2.15 Kg |
Direct labor incurred = $754,400 |
Actual hours of direct labor = 41000 |
Actual rate of direct labor = $754,400 / 41000 = $18.40 per hour |
Direct labor price variance = $32,800 U |
(SR - AR)* AH = -$32,800 |
(SR - $18.40) * 41000 = -$32,800 |
SR = $17.60 per hour |
Direct labor efficiency variance = (SH - AH) * SR = (43500 - 41000) * $17.60 = $44,000 F |
Standard hours for actual production = 58000 * 0.75 = 43500 hours |
b.
Overhead | |
Actual | $ 768,200.00 |
Applied | $ 748,200.00 |
Working:
Overhead applied = 58000*0.75*$17.20 = $748,200 |
Underapplied overhead = $20,000 U |
Actual applied overhead = Overhead applied + Underapplied overhead = $748,200 + $20,000 = $768,200 |
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