Question

Ander's Clothing manufactures embroidered jackets. The company uses a standard cost system to control manufacturing costs. The following data represent the standard unit cost of a​ jacket:  

i Data Table $4.15 per sq. ft.) Direct materials 3.0 sq. ft x 12.45 Direct labor $9.70 per hour) ( 2,0 hours x 19.40 Manufacturing overhead: Variable 2.0 hours x $0.68 per hour) 1.36 4.40 5.76 2.0 hours x $2.20 per hour) Fixed 37.61 Total standard cost per jacket Fixed overhead in total was budgeted to be $63,600 for each month Actual data for November of the current year include the following: a. Actual production was 14,000 jackets b. Actual direct materials used was 2.60 square feet per jacket at an actual cost of $4.30 per square foot. (Assume the direct materials purchased is the same as the direct materials used.) Actual direct labor usage of 25,800 hours for a total cost of $252,840. C. d. Actual fixed overhead cost was $57,508, while actual variable overhead cost was $21,930 iRequirements 1. Compute the price and quantity variances for direct materials. 2. Compute the rate and efficiency variances for direct labor. Compute the rate and efficiency variances for variable overhead 3. 4. Compute the fixed overhead budget variance and the fixed overhead volume variance 5. Company management intentionally purchased superior materials for November production. How did this decision affect the other cost variances? Overall, was the decision wise? Explain. 6. Journalize the usage of direct materials and the assignment of direct labor, including the related variances positive numbers. Enter Requirement 1. Compute the price and quantity variances for direct materials. (Enter the variances as currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variances as favorable (F) or unfavorable (U). Abbreviations used: DM Direct materials.) Begin by determining the formula for the price variance, then compute the price variance for direct materials. x ( DM price variance x ( Now determine the formula for the quantity variance and compute the quantity variance for direct materials. x( DM quantity variance ) x( Requirement 2. Compute the rate and efficiency variances for direct labor. (Enter the variances as currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variances as favorable (F) or unfavorable (U). Abbreviations used: DL Direct labor.) positive numbers. Enter Determine the formula for the rate variance, then compute the rate variance for direct labor. x ( DL rate variance x ( Determine the formula for the efficiency variance, then compute the efficiency variance for direct labor. DL efficiency variance X Requirement 3. Compute the rate and efficiency variances for variable overhead. (Enter the variances as currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variances as favorable (F) or unfavorable (U).) positive numbers. Enter Determine the formula for the rate variance, then compute the variable manufacturing overhead rate variance. Variable overhead rate variance X Determine the formula for the efficiency variance, then compute the variable overhead efficiency variance. Variable overhead efficiency variance ( X X Requirement 4. Compute the fixed overhead budget variance and the fixed overhead volume variance. (Enter the variances as positive numbers. Label the variances as favorable (F) or unfavorable (U). Abbreviations used: MOH Manufacturing overhead) Determine the formula for the fixed overhead budget variance, then compute the budget variance for fixed overhead. Fixed MOH budget variance Determine the formula for the fixed overhead volume variance, then compute the volume variance for fixed overhead Fixed MOH volume variance Requirement 5. Anders's management intentionally purchased superior materials for November production. How did this decision affect the other cost variances? Overall, was the decision wise? Explain. The favorable variances more than offset the unfavorable variances. If the superior materials purchased for the November production decreased materials and labor usage, then management's decision was Requirement 6. Journalize the usage of direct materials and the assignment of direct labor, including the related variances. (Record debits first, then credits. Exclude explanations from any journal entries.) First journalize the purchase of direct materials, including the related variance. Journal Entry Accounts Debit Credit Journalize the usage of direct materials, including the related variance. Journal Entry Debit Accounts Credit sts, including the related varianc Journalize the direct labor (Record both direct labor variances by preparing a single compound entry.) Journal Entry Date Accounts Debit Credit

Answer 1

A B C D 1 Requirement 1: 2 Actual Quantity (Actual Price Standard Price) DM Price Variance ($4.30 $4.15) 3 36400 $ 5,450 Unfavourable = 4 (Actual Quantity Standard Quantity) 5 Standard Price* DM Quantity Variance 6 $ 4.15 (36,400 42,000) 23,240 Favourable 7 8 Requirement 2: 9 Actual Hours (Actual Rate Standard Rate) DL Rate Variance 10 25800 ($9.8- $9.7) 2,580 Unfavourable 11 12 Standard Rate 13 $9.7 (Actual Hours - Standard Hours) DL Efficiency Variance (25,800 28,000) = 21,340 Favourable 14 15 Requirement 3 16 Actual Hours (Actual Rate Standard Rate) Variable Overhead Rate Variance 17 25800 ($0.85-$ 0.68) 4,386 Unfavourable 18 (Actual Hours Standard Hours) = |(25,800 28,000)= 19 Standard Rate Variable Overhead Efficiency Variance 20 $0.68 1,496 Favourable 21 22 Requirement 4 23 Budgeted Fixed Overhead - Actual Fixed Overhead Fixed MOH Budget Variance 24 $63,600 $57,508 = 6,092 Favourable 25 26 Applied Fixed Overhead - 27 $57,508 Budgeted Fixed Overhead $63,600 Fixed MOH Volume Variance 6,092 Favourable 28