Question

J&W Corporation manufactures a new electronic game console. The current standard cost sheet for a game console follows.

Direct materials, ? kilograms at $8 per kilogram	$	?	per game
Direct labor, 0.75 hours at ? per hour		?	per game
Overhead, 0.75 hours at ? per hour		?	per game
Total costs	$	39	per game

Assume that the following data appeared in J&W’s records at the end of the past month.

Actual production		46,500	units
Actual sales		43,500	units
Materials (115,500 kilograms)		?
Materials price variance		42,000	U
Materials efficiency variance		31,200	U
Direct labor price variance		28,800	U
Direct labor (32,000 hours)		534,400
Underapplied overhead (total)		18,300	U

There are no materials inventories.

Required:

a-1. Complete the standard cost sheet for a game console given below.

	Direct materials, kilograms at $8 per kilogram per game Direct labor, 0.75 hours at per hour per game Overhead, 0.75 hours at per hour per game Total costs $39 per game

a-2. Prepare a variance analysis for direct materials and direct labor.

	Direct materials: Price variance    Efficiency variance Direct labor: Price variance Efficiency variance

b. Assume that all production overhead is fixed and that the $18,300 underapplied is the only overhead variance that can be computed. What are the actual and applied overhead amounts?

	Overhead Actual Applied

Answer 1

a-1 Standard cost sheet - game console
Particulars	Per unit
Direct material (2.40 KG X $8)	$19.20
Direct labor ( 0.75 Hour X $15.80)	$11.85
Overhead (0.75 * $10.60)	$7.95
Total	$39.00

Working note

Computation of Standard Quantity of Material per KG and std cost of material per Game

Material efficiency variance = $31,200 U

(SQ - AQ) * SP = -$31,200

(SQ - 115500) * $8 = -$31,200

SQ = 111600 Kg

Standard quantity of material per Kg = Sq of Material/ Actual production 111600 / 46500 = 2.40 Kg

Standard cost of material = Std quantry per KG X Std price per KG

=$8X2.40kg= $19.20

Direct labor price variance = $32,800 U

(SR - AR)* AH = -$28,800

(SR - $16.70) * 32000 = -$28,800

SR = $15.80 per hour

Std Cost of Labour per Game= 0.75 HourX $15.80=$11.85

*Actual rate of direct labor = Actual Labour cost / Actual Hour $534,400 /32000 = $16.70 per hour

Computation of Std Overhead Cost & Overhead Rate per Hour

Std Overhead Cost = Total Std Cost- Direct Material Std Cost- Direct labour Std Cost

=$39-19.20-11.85= $7.95

Std Per Hour Variable OH Rate= $7.95/0.75= $10.60

Part-a-2
Direct Material
Direct Material price Variance	42000 U
Direct Material Efficiency Variance	31200 U
Direct Labour
Direct Labour Rate Variance	28800 U
Direct Labour Efficiency Variance	45425F

Working Note

Computation of Material Efficiency Variance

Direct labor efficiency variance = (SH - AH) * SR = (34875 - 32000) * $15.80 = $45425 F

Standard hours for actual production = 46500 * 0.75 = 34875 hours

b. Computation of Actual & Applied Overhead

Overhead Applied = Actual Production X Std Hour Required X Std Rate per Hour

Overhead applied = 46500*0.75*$10.60 = $3,69,675

Actual overhead = Overhead applied + Underapplied overhead = $369675 + $18300 = $387975