In all of the exercises involving variances, use “F” and “U” to designate favorable and...

In all of the exercises involving variances, use “F” and “U” to designate favorable and unfavorable variances, respectively.

Standard cost summary; materials and labor cost variances

AAUP Processors Inc. produces an average of 10,000 units each month. The factory standards are 20,000 hours of direct labor and 10,000 pounds of materials for this volume. The standard cost of direct labor is $9.00 per hour, and the standard cost of materials is $4.00 per pound. The standard factory overhead at this level of production is $20,000.

During the current month the production and cost reports reflected the following information:

Beginning units in process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None

Units finished. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,500

Units in process, end of month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None

Direct labor hours worked . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000

Pounds of material purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000

Pounds of materials used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,400

Cost of direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $178,000

Cost of materials purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,000

On the basis of this information:

1. Prepare a standard cost summary.

2. Calculate the materials (use the materials purchase price variance) and labor cost variances, and indicate whether they are favorable or unfavorable, using the formulas on pages 402 and 403.