Question

Problem 24-02A 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 11,400 10,700 Direct labor payroll $175,500 $167,200 Direct labor hours 15,000 15,200 Manufacturing overhead incurred $202,600 Manufacturing overhead applied $205,200 Machine hours expected to be used at normal capacity 43,500 Budgeted fixed overhead for June $65,250 Variable overhead rate per machine hour $3.00 Fixed overhead rate per machine hour $1.50 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 $492,000. Selling and administrative expenses were $39,500. 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, 2020June 30, 2020For the Month Ended June 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 $    FavorableNeither favorable nor unfavorableUnfavorable    Neither favorable nor unfavorableUnfavorableFavorable    Neither favorable nor unfavorableUnfavorableFavorable    FavorableNeither favorable nor unfavorableUnfavorable    UnfavorableNeither favorable nor unfavorableFavorable DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances    Neither favorable nor unfavorableUnfavorableFavorable 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

1) Total materials variance= (Actual quantity*Actual price)-(Standard quantity*Standard price)

= (11400*$2.20)-(10700*$2.10)= $2610 U

Materials price variance= (Actual price-Standard price)*Actual quantity

= ($2.20-2.10)*11400= $1140 U

Materials quantity variance= (Actual quantity-Standard quantity)*Standard price

= (11400-10700)*$2.10= $1470 U

2) Total labor variance= (Actual hour*Actual rate)-(Standard hour*Standard rate)

= $175500-167200= $8300 U

Standard rate= $167200/15200= $11 per hour

Labor rate variance= (Actual rate-Standard rate)*Actual hour

= ($175500-15000*$11)= $10500 U

Labor efficiency variance= (Actual hour-Standard hour)*Standard rate

= (15000-15200)*$11= $2200 F

3) Total overhead rate per machine hour= $3.00+1.50= $4.50

Total overhead variance= Actual overhead-Applied overhead

= $202600-(15200*3*$4.50)= $2600 F

Prepare an income statement for management. (Ignore income taxes.)

AYALA CORPORATION
Income Statement
For the Month Ended June 30, 2020
Sales			$492000
Cost of goods sold (at standard)			394870
Gross Profit (at Standard)			97130
Variances
Materials price variance	$1140	Unfavorable
Materials quantity variance	1470	Unfavorable
Labor rate variance	10500	Unfavorable
Labor efficiency variance	2200	Favorable
Overhead variance	2600	Favorable
Total Variance- unfavorable			8310
Gross Profit (Actual)			88820
Selling and administrative expenses			39500
Net Income			$49320

Cost of goods sold= (10700*$2.10+167200+205200)= $394870