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Caroline, Inc. planned to produce 20,000 units of product and work 100,000 direct labor hours in 2013. Manufacturing overhead at the 100,000 direct labor hours level of activity was estimated to be: Variable manufacturing overhead $ 700,000 Fixed manufacturing overhead 300,000 Total manufacturing overhead $1,000,000 At the end of 2013, 19,000 units of product were actually produced and 98,000 actual direct labor hours were worked. Total actual overhead costs for 2013 were $935,000. Instructions (a) Compute the total overhead variance. a(b) Compute the overhead controllable variance. a(c) Compute the overhead volume variance. aEx. 222 Jackson Manufacturing planned to produce 20,000 units of product and work at the 60,000 direct labor hours level of activity for 2013. Manufacturing overhead at this level of activity and the predetermined overhead rate are as follows: Predetermined Overhead Rate per Direct Labor Hour Variable manufacturing overhead $300,000 $5 Fixed manufacturing overhead 120,000 2 Total manufacturing overhead $420,000 $7 At the end of 2013, 21,000 units were actually produced and 61,500 direct labor hours were actually worked. Total actual manufacturing overhead costs were $430,000. Instructions Using a two-variance analysis of manufacturing overhead, calculate the following variances and indicate whether they are favorable or unfavorable: (a) Overhead controllable variance. (b) Overhead volume variance. A Ex. 223 Adam Corporation prepared the following variance report. ADAM CORPORATION Variance Report—Purchasing Department for Week Ended January 9, 2013 Type of Quantity Actual Standard Price Materials Purchased Price Price Variance Explanation Brown ? lbs. $5.25 $5.00 $6,000 ? Price increase Green 8,000 oz. ? 3.25 1,600 U Rush order White 22,000 units $0.45 ? 660 F Bought larger quantity Ex. 223 (Cont.) Instructions Fill in the appropriate amounts or letters for the question marks in the report. Ex. 224 Pepper Industries uses a standard cost accounting system. During March, 2013, the company reported the following manufacturing variances: Materials price variance $1,600 F Materials quantity variance 2,400 U Labor price variance 600 U Labor quantity variance 2,200 U Overhead controllable 500 F Overhead volume 3,000 U In addition, 15,000 units of product were sold at $18 per unit. Each unit sold had a standard cost of $14. Selling and administrative expenses for the month were $15,000. Instructions Prepare an income statement for management for the month ending March 31, 2013. aEx. 225 Howard, Inc. developed the following standards for 2013: Howard, Inc. Standard Cost Card Cost Elements Standard Quantity × Standard Price = Standard Cost Direct materials 5 pounds $ 5 $25 Direct labor 1 hour $18 18 Manufacturing overhead 1 hour $10 10 $53 The company planned to produce 120,000 units of product and work at the 120,000 direct labor level of activity in 2013. The company uses a standard cost accounting system which records standard costs in the accounts and recognizes variances in the accounts at the earliest opportunity. During 2013, 116,000 actual units of product were produced. Instructions Prepare the journal entries to record the following transactions for Howard, Inc. during 2013. (a) Purchased 588,000 pounds of raw materials for $4.90 per pound on account. (b) Actual direct labor payroll amounted to $2,108,000 for 114,000 actual direct labor hours worked. Factory labor cost is to be recorded and distributed to production. (c) Direct materials issued for production amounted to 588,000 pounds which actually cost $4.90 per pound. (d) Actual manufacturing overhead costs incurred were $1,152,000 in 2013. (e) Manufacturing overhead was applied when the 116,000 units were completed. (f) Transferred the 116,000 completed units to finished goods. aEx. 226 Presented below is a flexible manufacturing budget for Ganem Manufacturing, which manufactures fine timepieces: Activity Index: Standard direct labor hours 2,800 3,200 3,600 4,000 Variable costs Indirect materials $ 5,600 $ 6,400 $ 7,200 $ 8,000 Indirect labor 3,220 3,680 4,140 4,600 Utilities 7,280 8,320 9,360 10,400 Total variable 16,100 18,400 20,700 23,000 Fixed costs Supervisory salaries 1,000 1,000 1,000 1,000 Rent 3,000 3,000 3,000 3,000 Total fixed 4,000 4,000 4,000 4,000 Total costs $20,100 $22,400 $24,700 $27,000 aEx. 226 (Cont.) The company applies the overhead on the basis of direct labor hours at $7.00 per direct labor hour and the standard hours per timepiece is 1/2 hour each. The company’s actual production was 5,400 timepieces with 2,700 actual hours of direct labor. Normal capacity is 3,200 hours. Actual overhead was $20,200. Instructions (a) Compute the controllable and volume overhead variances. a(b) Prepare the entries for manufacturing overhead during the period and the entry to recognize the overhead variances at the end of the period. Ex. 227 The following information was taken from the annual manufacturing overhead cost budget of Cinnamon Manufacturing: Variable manufacturing overhead costs $186,000 Fixed manufacturing overhead costs $124,000 Normal production level in direct labor hours 62,000 Normal production level in units 31,000 During the year, 30,000 units were produced, 64,000 hours were worked, and the actual manufacturing overhead costs were $322,000. The actual fixed manufacturing overhead costs did not deviate from the budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Ex. 227 (Cont.) Instructions (a) Compute the total, fixed, and variable predetermined manufacturing overhead rates. a(b) Compute the total, controllable, and volume overhead variances. Ex. 228 Monte Industries has a standard costing system. The following data are available for July: a. Actual manufacturing overhead cost incurred: $22,000 b. Actual machine hours worked: 1,600 c. Overhead volume variance: $3,600 Unfavorable d. Total overhead variance: $2,000 Unfavorable e. Overhead is assigned to production on the basis of machine hours Instructions Determine the amount of (1) the controllable overhead variance and (2) the overhead applied.

Caroline, Inc. planned to produce 20,000 units of product and work 100,000 direct labor hours in 2013. Manufacturing overhead at the 100,000 direct labor hours level of activity was estimated to be:

Variable manufacturing overhead $ 700,000

Fixed manufacturing overhead 300,000

Total manufacturing overhead $1,000,000

At the end of 2013, 19,000 units of product were actually produced and 98,000 actual direct labor hours were worked. Total actual overhead costs for 2013 were $935,000.

Instructions

(a) Compute the total overhead variance.

a(b) Compute the overhead controllable variance.

a(c) Compute the overhead volume variance.

 


aEx. 222

Jackson Manufacturing planned to produce 20,000 units of product and work at the 60,000 direct labor hours level of activity for 2013. Manufacturing overhead at this level of activity and the predetermined overhead rate are as follows:

Predetermined

Overhead Rate per

Direct Labor Hour

Variable manufacturing overhead $300,000 $5

Fixed manufacturing overhead 120,000 2

Total manufacturing overhead $420,000 $7

At the end of 2013, 21,000 units were actually produced and 61,500 direct labor hours were actually worked. Total actual manufacturing overhead costs were $430,000.

Instructions

Using a two-variance analysis of manufacturing overhead, calculate the following variances and indicate whether they are favorable or unfavorable:

(a) Overhead controllable variance.

(b) Overhead volume variance.

A

Ex. 223

Adam Corporation prepared the following variance report.

ADAM CORPORATION

Variance Report—Purchasing Department

for Week Ended January 9, 2013

Type of Quantity Actual Standard Price

Materials Purchased Price Price Variance Explanation

Brown ? lbs. $5.25 $5.00 $6,000 ? Price increase

Green 8,000 oz. ? 3.25 1,600 U Rush order

White 22,000 units $0.45 ? 660 F Bought larger quantity

 

Ex. 223 (Cont.)

Instructions

Fill in the appropriate amounts or letters for the question marks in the report.

 

Ex. 224

Pepper Industries uses a standard cost accounting system. During March, 2013, the company reported the following manufacturing variances:

Materials price variance $1,600 F

Materials quantity variance 2,400 U

Labor price variance 600 U

Labor quantity variance 2,200 U

Overhead controllable 500 F

Overhead volume 3,000 U

In addition, 15,000 units of product were sold at $18 per unit. Each unit sold had a standard cost of $14. Selling and administrative expenses for the month were $15,000.

Instructions

Prepare an income statement for management for the month ending March 31, 2013.

 

aEx. 225

Howard, Inc. developed the following standards for 2013:

Howard, Inc.

Standard Cost Card

Cost Elements Standard Quantity × Standard Price = Standard Cost

Direct materials 5 pounds $ 5 $25

Direct labor 1 hour $18 18

Manufacturing overhead 1 hour $10 10

$53

The company planned to produce 120,000 units of product and work at the 120,000 direct labor level of activity in 2013. The company uses a standard cost accounting system which records standard costs in the accounts and recognizes variances in the accounts at the earliest opportunity. During 2013, 116,000 actual units of product were produced.

Instructions

Prepare the journal entries to record the following transactions for Howard, Inc. during 2013.

(a) Purchased 588,000 pounds of raw materials for $4.90 per pound on account.

(b) Actual direct labor payroll amounted to $2,108,000 for 114,000 actual direct labor hours worked. Factory labor cost is to be recorded and distributed to production.

(c) Direct materials issued for production amounted to 588,000 pounds which actually cost $4.90 per pound.

(d) Actual manufacturing overhead costs incurred were $1,152,000 in 2013.

(e) Manufacturing overhead was applied when the 116,000 units were completed.

(f) Transferred the 116,000 completed units to finished goods.

 

aEx. 226

Presented below is a flexible manufacturing budget for Ganem Manufacturing, which manufactures fine timepieces:

Activity Index:

Standard direct labor hours 2,800 3,200 3,600 4,000

Variable costs

Indirect materials $ 5,600 $ 6,400 $ 7,200 $ 8,000

Indirect labor 3,220 3,680 4,140 4,600

Utilities 7,280 8,320 9,360 10,400

Total variable 16,100 18,400 20,700 23,000

Fixed costs

Supervisory salaries 1,000 1,000 1,000 1,000

Rent 3,000 3,000 3,000 3,000

Total fixed 4,000 4,000 4,000 4,000

Total costs $20,100 $22,400 $24,700 $27,000


aEx. 226 (Cont.)

The company applies the overhead on the basis of direct labor hours at $7.00 per direct labor hour and the standard hours per timepiece is 1/2 hour each. The company’s actual production was 5,400 timepieces with 2,700 actual hours of direct labor. Normal capacity is 3,200 hours. Actual overhead was $20,200.

Instructions

(a) Compute the controllable and volume overhead variances.

a(b) Prepare the entries for manufacturing overhead during the period and the entry to recognize the overhead variances at the end of the period.

 

Ex. 227

The following information was taken from the annual manufacturing overhead cost budget of Cinnamon Manufacturing:

Variable manufacturing overhead costs $186,000

Fixed manufacturing overhead costs $124,000

Normal production level in direct labor hours 62,000

Normal production level in units 31,000

During the year, 30,000 units were produced, 64,000 hours were worked, and the actual manufacturing overhead costs were $322,000. The actual fixed manufacturing overhead costs did not deviate from the budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours.

 

Ex. 227 (Cont.)

Instructions

(a) Compute the total, fixed, and variable predetermined manufacturing overhead rates.

a(b) Compute the total, controllable, and volume overhead variances.

 

Ex. 228

Monte Industries has a standard costing system. The following data are available for July:

a. Actual manufacturing overhead cost incurred: $22,000

b. Actual machine hours worked: 1,600

c. Overhead volume variance: $3,600 Unfavorable

d. Total overhead variance: $2,000 Unfavorable

e. Overhead is assigned to production on the basis of machine hours

Instructions

Determine the amount of (1) the controllable overhead variance and (2) the overhead applied.

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