Burlington Beverages Inc. Variance analysis; journal entries; other analyses for multip...

Burlington Beverages Inc.

Variance analysis; journal entries; other analyses for multiple departments

Cost and production data for Burlington Beverages Inc., are presented as follows:

Required:

1. Calculate net variances for materials, labor, and factory overhead.

a. Calculate specific materials and labor variances by department, using the diagram format in Figure 8-4.

b. Comment on the possible causes for each of the variances that you computed.

2. Make all journal entries to record production costs in Work in Process and Finished Goods.

3. Prove balances of Work in Process for both departments.

4. Prove that all costs have been accounted for. Note: Assume that materials, labor, and overhead are added evenly throughout the process.

5. Assume that 4,000 units were sold at $40 each.

a. Calculate the gross margin based on standard cost.

b. Calculate the gross margin based on actual cost.

c. Why does the gross margin at actual cost differ from the gross margin at standard cost.

6. As the plant controller, you present the variance report in Item 1 above to Paula Crowe, the plant manager. After reading it, Paula states: “If we present this performance report to corporate with that large unfavorable labor variance in Blending, nobody in the plant will receive a bonus. Those standard hours of 5,500 are way too tight for this production process. Fifty-eight hundred hours would be more reasonable, and that would result in a favorable labor efficiency variance that would more than offset the unfavorable labor rate variance. Please redo the variance calculations using 5,800 hours as the standard.” You object, but Paula ends the conversation with, “That is an order.”

a. What standards of ethical professional practice would be violated if you adhered to Paula’s order?

b. How would you attempt to resolve this ethical conflict?

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