Question

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

Direct materials, ? kilograms at $6 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	$	42	per game

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

Actual production		46,000	units
Actual sales		43,000	units
Materials (114,500 kilograms)	$	728,000
Materials price variance		41,000	U
Materials efficiency variance		38,400	U
Direct labor price variance		13,400	U
Direct labor (33,500 hours)		556,100
Underapplied overhead (total)		18,200	U

There are no materials inventories.

Required:

a. Complete the standard cost sheet for a game console given below. Compute the direct labor efficiency variance. (Do not round intermediate calculations. Round your answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

b. Assume that all production overhead is fixed and that the $18,200 underapplied is the only overhead variance that can be computed. What are the actual and applied overhead amounts?

Answer 1

Requirement a

Given Material efficiency variance = $38,400 U

Direct Material Efficiency Variance = (Actual Quantity Used - Standard Quantity Allowed) x Standard Price

Direct Material Efficiency Variance = (114,500kgs – Standard Quantity Allowed) x $6.00 = $38,400 U

Standard Quantity Allowed = 108,100 kgs

Standard Quantity Allowed per unit = 108,100 kgs / 46,000 units = 2.35kgs

Given Direct labour price variance = $13,400 U

Direct Labour Price Variance = (Actual rate- Standard rate) x Actual hours

Direct Labour Price Variance = (($556,100/33,500 hrs) - Standard rate) x 33,500 hrs = $13,400 U

Standard rate = $16.20

Requirement 2

Given under applied overhead = $18,200

Under applied overhead = Actual overhead - Applied overhead

Applied overhead = $21 x 33,500 hours = $703,500

Actual Overhead =$703,500 + $18,200 = $721,700