In all problems involving variances, use “F” and “U” to indicate favorable and unfavorab...

In all problems involving variances, use “F” and “U” to indicate favorable and unfavorable variances, respectively.

Allocation of variances

Marina del Rey Manufacturing Corp. uses a standard cost system that records raw materials at actual cost, records materials price variances at the time that raw materials are issued to work in process, and prorates all variances at year-end. Variances associated with direct materials are prorated based on the direct materials balances in the appropriate accounts, and variances associated with direct labor are prorated based on the direct labor balances in the appropriate accounts. The following information is available for Marina del Rey for the year ended December 31:

Raw materials inventory at December 31 . . . . . . . . . . . . . . . . . . . . . . . . $ 65,000

Finished goods inventory at December 31:

Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,000

Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,500

Applied factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,400

Cost of goods sold for the year ended December 31:

Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,000

Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 739,500

Applied factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591,600

Materials quantity variance (favorable) . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000

Materials price variance (unfavorable). . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000

Labor efficiency variance (favorable) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000

Labor rate variance (unfavorable). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000

Factory overhead applied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 696,000

There were no beginning inventories and no ending work in process inventory.

Required:

Calculate the following:

1. Amount of materials price variance to be prorated to finished goods inventory at December 31. (Hint: You must first determine the ratio of direct materials cost in the ending finished goods inventory.)

2. Total amount of direct materials cost in the finished goods inventory at December 31, after all variances have been prorated.

3. Total amount of direct labor cost in the finished goods inventory at December 31, after all variances have been prorated.

4. Total cost of goods sold for the year ended December 31, after all variances have been prorated.