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 $2.20 $2.10 Raw materials units 11,300 10,900 Direct labor payroll $166,500 $159,600 Direct labor hours 15,000 15,200 Manufacturing overhead incurred $210,420 Manufacturing overhead applied $214,320 Machine hours expected to be used at normal capacity 43,500 Budgeted fixed overhead for June $73,950 Variable overhead rate per machine hour $3.00 Fixed overhead rate per machine hour $1.70 Overhead is applied on the basis of standard machine hours. 3.00 hours of machine time are required for each direct labor hour. The jobs were sold for $473,000. Selling and administrative expenses were $44,400. 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 SHOW LIST OF ACCOUNTS

Compute the total overhead variance. Total overhead variance $ FavorableUnfavorableNeither favorable nor unfavorable SHOW LIST OF ACCOUNTS

Prepare an income statement for management. (Ignore income taxes.) (Round per unit values to 2 decimal places, e.g. 52.75 and final answers to 0 decimal places, e.g. 52.) AYALA CORPORATION Income Statement For the Year Ended June 30, 2020For the Month Ended June 30, 2020June 30, 2020 $ DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances $    UnfavorableNeither favorable nor unfavorableFavorable    UnfavorableFavorableNeither favorable nor unfavorable    UnfavorableFavorableNeither favorable nor unfavorable    Neither favorable nor unfavorableFavorableUnfavorable    FavorableNeither favorable nor unfavorableUnfavorable DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances    FavorableNeither favorable nor unfavorableUnfavorable DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances $

Answer 1

Answer-

(a) Direct materials variance = ( actual rate - std rate) actual qty

                                                = ($2.20 - $2.10) 11,300

                                               = 1130(U)

(b) Direct material quantity variance = (11,300 - 10,900)2.1

                                                              = 840(U)

(c) labor rate variance = (11.1 - 10.5) 15,000

                                        = 9000 (U)

(d)

Labor quantity variance = (15,000 - 15,200) 10.5

                                                              = 2100(F)

total overhead variance = Actual overhead - overhead applied

                                      = $210,420 - $214,320

                                     = 3900(F)

(c) Income statement

Sale revenue		$473,000
COGS at standard		$396,810 ($2.10*10,900+$159,600+214,320)
Gross profit At standard		$76,190
Variances:
Material price	1130 (U)
Material qty variance	840 (U)
Labor price variance	9000 (U)
Labor qty variance	2100 (F)
Overhead variance	3900 (F)
Total variance		4970 (U)
Gross profit ( Actual)		71,220
Selling and administrative expense		44,400
Net income		$26,820