Question

Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2020. Costs and Production Data Actual Standard Raw materials unit cost $2.10 $1.90 Raw materials units 11,300 10,900 Direct labor payroll $168,720 $166,770 Direct labor hours 14,800 15,300 Manufacturing overhead incurred $232,608 Manufacturing overhead applied $235,008 Machine hours expected to be used at normal capacity 41,500 Budgeted fixed overhead for June $66,400 Variable overhead rate per machine hour $3.20 Fixed overhead rate per machine hour $1.60 Overhead is applied on the basis of standard machine hours. 3.20 hours of machine time are required for each direct labor hour. The jobs were sold for $492,000. Selling and administrative expenses were $39,400. Assume that the amount of raw materials purchased equaled the amount used.

Compute all of the variances for (1) direct materials and (2) direct labor. (Round per unit values to 2 decimal places, e.g. 52.75 and final answers to 0 decimal places, e.g. 52.)

(1)		Total materials variance		$		FavorableUnfavorableNeither favorable nor unfavorable
		Materials price variance		$		FavorableUnfavorableNeither favorable nor unfavorable
		Materials quantity variance		$		FavorableUnfavorableNeither favorable nor unfavorable
(2)		Total labor variance		$		FavorableUnfavorableNeither favorable nor unfavorable
		Labor price variance		$		FavorableUnfavorableNeither favorable nor unfavorable
		Labor quantity variance		$		FavorableUnfavorableNeither favorable nor unfavorable

(b) Compute the total overhead variance.

(c) Prepare an income statement for management. (Ignore income taxes.) *** PLEASE COMPLETE FULL PROBLEM

Answer 1

	in $
ans 1
Total Direct Materials Cost Variance A+B	3020	Unfavorable
Direct Materials Price Variance A	2260	Unfavorable
(AQ*AP)-(AQ*SP)
11300*(2.1-1.9)
Direct Materials Quantity Variance B	760	Unfavorable
SP*(AQ-SQ allowed)
1.9*(11300-10900)
ans 2
Total Direct Labor Cost Variance C+D	1950	Unfavorable
Direct Labor Rate Variance C	7400	Unfavorable
AH*(AR-SR)
14800*(11.4-10.9)
Direct Labor Time Variance D	5450	Favorable
10.9*(14800-15300)
Actual Direct labor rate	11.40
168720/14800
Standard labor rate	10.9
166770/15300
ans 3
Total overhead variance	2400	F
Actual-Applied
232608-235008	-2400
ans 4
Income statement
for the month ended June 2020
Sales			$492,000
Less: cost of good sold (standard)			422488
Material (1.9*10900)+Labor (10.9*15300)+overhead235008			$69,512
Gross profit at standard
Variance
Direct Materials Price Variance A	2260	Unfavorable
Direct Materials Quantity Variance B	760	Unfavorable
Direct Labor Rate Variance C	7400	Unfavorable
Direct Labor Time Variance D	5450	Favorable
Overhea variance	2400	Favorable
Total variance			2570	Unfavorable
Gross profit at actual			$66,942
Selling and administrative expenses			39400
Net income			$27,542
If any doubt please comment. If satisfied you can rate