Question

In: Accounting

17. For external reporting purposes, how are fixed manufacturing costs treated? a. As period costs. b. Expensed...

17. For external reporting purposes, how are fixed manufacturing costs treated?

a.	As period costs.
b.	Expensed as incurred.
c.	Period costs included in the value of inventory.
d.	Product costs included in the value of inventory.

Java Gourmet Coffee

Java Gourmet Coffee reports the following data for April 2010 where 200,000 pounds of roasted gourmet coffee beans were actually produced (note: standard costs do not allow for any wastage),

Actual:

	Direct Materials:
	Quantity of coffee beans:	210,000 pounds
	Cost per pound:	$0.60 per pound

	Direct Labor:
	Direct labor rate:	$19.00 per hour
	Labor hours used:	13,000 hours

	Variable Overhead:
	Actual costs:	$21,600

Standard:

	Direct Materials:
	Quantity of coffee beans:	200,000 pounds
	Cost per pound:	$0.50 per pound

	Direct Labor:
	Direct labor rate:	$20.00 per hour
	Labor hours to be used:	0.05 hours per pound

	Variable overhead:	$.10 per pound

18. Refer to Java Gourmet Coffee. Calculate the totaldirect materials variance.

a.	$21,000 F
b.	$26,000 U
c.	$5,000 U
d.	$21,000 U

19. Refer to Java Gourmet Coffee. Calculate the direct materials price variance.

a.	$21,000 F
b.	$26,000 U
c.	$5,000 U
d.	$21,000 U

20. Refer to Java Gourmet Coffee. Calculate the direct materials efficiency (usage) variance.

a.	$21,000 F
b.	$26,000 U
c.	$5,000 U
d.	$21,000 U

Expert Solution

#17
Correct Answer = Option ‘d’ Fixed manufacturing cost is treated as Product Costs included in the value of inventory. This is because for external reporting purpose, fixed manufacturing overhead is ‘absorbed’ to units sold and ending inventory.
#18
Correct Answer = Option ‘B’ $ 26,000 U

Total Material Variance
(	Standard Cost = 200000 x $ 0.5	-	Actual Cost	)
(	$ 100,000.00	-	$ 126,000.00	)
	-26000
	Variance		$ 26,000.00		Unfavourable-U

#19

Correct Answer = Option ‘D’ $ 21,000 U

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$ 0.50	-	$ 0.60	)	x	210000
	-21000
	Variance		$ 21,000.00			Unfavourable-U

#20

Correct Answer = Option ‘C’ $ 5000 U

Material Efficiency Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	200000	-	210000	)	x	$ 0.50
	-5000
	Variance		$ 5,000.00			Unfavourable-U

ekkarill92 answered 2 years ago

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