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Platt Company produces one product, a putter called PAR-putter. Platt uses a standard cost system and determines that it should take one hour of direct labor to produce one PAR-putter. The normal production capacity for this putter is 100,000 units per year. The total budgeted overhead at normal capacity is \$500,000 comprised of \$200,000 of variable costs and \$300,000 of fixed costs. Platt applies overhead on the basis of direct labor hours.

During the current year, Platt produced 85,000 putters, worked 89,000 direct labor hours, and incurred variable overhead costs of \$160,000 and fixed overhead costs of \$300,000.

Instructions

(a) Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.

(b) Compute the applied overhead for Platt for the year.

(c) Compute the total overhead variance.

Ex. 212

Hector Company has developed the following standard costs for its product for 2012:

HECTOR COMPANY

Standard Cost Card

Product A

Cost Element Standard Quantity × Standard Price = Standard Cost

Direct materials 4 pounds \$3 \$12

Direct labor 3 hours 8 24

Manufacturing overhead 3 hours 4 12

\$48

The company expected to produce 30,000 units of Product A in 2013 and work 90,000 direct labor hours.

Actual results for 2013 are as follows:

· 31,000 units of Product A were produced.

· Actual direct labor costs were \$746,200 for 91,000 direct labor hours worked.

· Actual direct materials purchased and used during the year cost \$346,500 for 126,000 pounds.

· Actual variable overhead incurred was \$155,000 and actual fixed overhead incurred was \$205,000.

Instructions

Compute the following variances showing all computations to support your answers. Indicate whether the variances are favorable or unfavorable.

(a) Materials quantity variance.

(b) Total direct labor variance.

(c) Direct labor quantity variance.

(d) Direct materials price variance.

Ex. 213

Dart Company developed the following standard costs for its product for 2013:

DART COMPANY

Standard Cost Card

Cost Elements Standard Quantity × Standard Price = Standard Cost

Direct materials 4 pounds \$ 5 \$20

Direct labor 2 hours 10 20

Variable overhead 2 hours 4 8

Fixed overhead 2 hours 2 4

\$52

The company expected to work at the 120,000 direct labor hours level of activity and produce 60,000 units of product.

Actual results for 2013 were as follows:

· 56,800 units of product were actually produced.

· Direct labor costs were \$1,092,000 for 112,000 direct labor hours actually worked.

· Actual direct materials purchased and used during the year cost \$1,108,800 for 231,000 pounds.

· Total actual manufacturing overhead costs were \$680,000.

Ex. 213 (cont.)

Instructions

Compute the following variances for Dart Company for 2013 and indicate whether the variance is favorable or unfavorable.

1. Direct materials price variance.

2. Direct materials quantity variance.

3. Direct labor price variance.

4. Direct labor quantity variance.

Ans: N/A, LO: 4,5,10, Bloom: AN, Difficulty: Medium, Min: 20, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Ex. 214

Flagstaff, Inc. uses standard costing for its one product, baseball bats. The standards call for 3 board-feet of wood at \$1.40 per board-foot, and 45 minutes of work at \$12 per hour per bat. Total manufacturing overhead costs were estimated at \$9,450, of which the variable portion was \$0.50 per bat and the fixed portion was \$1.00 per bat with an estimate of 6,300 bats to be produced. Flagstaff identifies price variances at the earliest possible point in time.

During March, the company had the following results:

Direct labor used = 4,800 hours at a cost of \$56,400

Actual manufacturing overhead fixed costs = \$6,000

Actual manufacturing overhead variable costs = \$3,100

Bats produced = 6,000

Instructions

Compute the following variances for March.

1. Labor quantity variance

2. Total labor variance

Ex. 215

Prescott Manufacturing manufactures widgets for distribution. The standard costs for the manufacture of widgets follow:

Standard Costs Actual Costs

Direct materials 3 lbs. per widget at 31,000 lbs. at \$34

\$35 per pound per pound

Direct labor 2.5 hours per widget 22,500 hours at

at \$11 per hour \$11.80 per hour

Factory overhead Variable cost, \$24/widget \$241,500 variable cost

Fixed cost, \$40/widget \$381,250 fixed cost

Ex. 215 (Cont.)

Budgeted factory overhead was \$640,000. Overhead applied is based on widgets produced. The company estimated that 10,000 widgets would be produced; however, only 9,600 were produced.

Instructions

Calculate the following amounts.

1. Rate at which total factory overhead is applied

2. Materials price variance

3. Total materials variance

Ex. 216

More Hits Company manufactures aluminum baseball bats that it sells to university athletic departments. It has developed the following per unit standard costs for 2013 for each baseball bat:

Manufacturing

Standard Quantity 2 Pounds (Aluminum) 1/2 hour 1/2 hour

Standard Price \$4.00 \$10.00 \$6.00

Unit Standard Cost \$8.00 \$5.00 \$3.00

In 2013, the company planned to produce 120,000 baseball bats at a level of 60,000 hours of direct labor.

Ex. 216 (Cont.)

Actual results for 2013 are presented below:

1. Direct materials purchases were 246,000 pounds of aluminum which cost \$1,020,900.

2. Direct materials used were 220,000 pounds of aluminum.

3. Direct labor costs were \$575,260 for 58,700 direct labor hours actually worked.

4. Total manufacturing overhead was \$352,000.

5. Actual production was 114,000 baseball bats.

Instructions

(a) Compute the following variances:

1. Direct materials price.

2. Direct materials quantity.

3. Direct labor price.

4. Direct labor quantity.

a(b) Prepare the journal entries to record the transactions and events in 2013.

Ex. 217

The standard cost of Product 245 manufactured by Albert Industries includes 2 pounds of direct materials at \$4.00 per pound. During September, 40,000 pounds of direct materials are purchased at a cost of \$3.85 per pound, and all of the direct materials are used to produce 19,000 units of Product 245.

Instructions

(a) Compute the materials price and quantity variances.

a(b) Journalize the purchase of the materials and the issuance of the materials, assuming a standard cost system is used.

Ex. 218

Aztec, Inc.’s standard labor cost of producing one unit of product is 2 hours at the rate of \$14.00 per hour. During February, 52,000 hours of labor are incurred at a cost of \$13.80 per hour to produce 25,000 units of product.

Instructions

(a) Compute the labor price and labor quantity variances.

a(b) Journalize the incurrence of the labor costs and the assignment of direct labor to production, assuming a standard cost system is used.

Ex. 219

The following direct labor data pertain to the operations of Murray Industries for the month of November:

Standard labor rate \$15.00 per hr.

Actual hours incurred 9,000

The standard cost card shows that 2.5 hours are required to complete one unit of product. The actual labor rate incurred exceeded the standard rate by 10%. Four thousand units were manufactured in November.

Ex. 219 (Cont.)

Instructions

(a) Calculate the price, quantity, and total labor variances.

a(b) Journalize the entries to record the labor variances.

aEx. 220

North Coast Manufacturing provided the following information about its standard costing system for 2013:

Standard Data Actual Data

Labor 2 hrs. @ \$21 per hr. Produced 9,000 units

Budgeted fixed overhead \$100,000 Labor worked 17,000 hrs. costing \$340,000

Budgeted production 10,000 units

North Coast applies fixed overhead at \$10 per unit produced.

Instructions

Determine the amounts of the overhead variances.

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