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Flexible Budget, Standard Cost Variances, T-Accounts Ingles Company manufactures external hard drives. At the beginning of...

Flexible Budget, Standard Cost Variances, T-Accounts

Ingles Company manufactures external hard drives. At the beginning of the period, the following plans for production and costs were revealed:

Units to be produced and sold 25,000
Standard cost per unit:
Direct materials $ 10
Direct labor 8
Variable overhead 4
Fixed overhead 3
Total unit cost $ 25

During the year, 24,800 units were produced and sold. The following actual costs were incurred:

Direct materials $263,872
Direct labor 204,352
Variable overhead 107,310
Fixed overhead 73,908

There were no beginning or ending inventories of direct materials. The direct materials price variance was $9,672 unfavorable. In producing the 24,800 units, a total of 12,772 hours were worked, 3 percent more hours than the standard allowed for the actual output. Overhead costs are applied to production using direct labor hours.

Required:

d. Fixed overhead spending and volume variances

Spending variance $ Favorable
Volume variance $

e. Variable overhead spending and efficiency variances

Variable overhead spending variance $ Unfavorable
Variable overhead efficiency variance $ Unfavorable

3. Use T-accounts to show the flow of costs through the system. In showing the flow, you do not need to show detailed overhead variances. Show only the over- and underapplied variances for fixed and variable overhead. Record the following transactions in the T-accounts: If an amount is zero, enter "0".

(a) purchase of materials,

(b) issuance of materials into production,

(c) incurrence of direct labor cost,

(d) application of variable overhead cost to production,

(e) application of fixed overhead cost to production,

(f) transfer of finished goods to finished goods inventory,

(g) sale of goods,

(h) closure of Direct Materials Price Variance account,

(i) closure of Direct Materials Usage Variance account,

(j) closure of Direct Labor Efficiency Variance account,

(k) closure of Variable Overhead Control account, and

(l) closure of Fixed Overhead Control account.

Enter these transactions in the T-accounts in the same order that they are presented here.

Materials
(a)
Work in Process
Finished Goods
Direct Materials Price Variance
(a)
Direct Materials Usage Variance
Accounts Payable
Wages Payable
Direct Labor Rate Variance
Direct Labor Efficiency Variance
Variable Overhead Control
Fixed Overhead Control
Cost of Goods Sold
$
$

Solutions

Expert Solution

d.

Calculation of Variable Overhead variance
1 Actual Hours(Given) 12772
2 Standard Hours (3% Less than the Actual Hours) 12400
(12772*100/103)
3 Standard Variable Overhead Cost($4*25000) 100000
4 Standard Rate per hour(3/2) 8.06
5 Actual Variable Overhead(Given) 107310
6 Budgeted Variable Overhead Cost at Actual Hours 102942
(Standard rate * Actual Hours)=(4*1)
7 Variable Overhead Cost applied to products 99944
(standard rate*standard hours)=(2*4)
8 Variable Overhead Spending Variance(5-6)(UF) 4368
9 Variable Overhead Efficiency Variance(6-7)(UF)

2998

e.

Calculation of Fixed Overhead variance:
10 Standard Fixed Overhead Cost($3*25000) 75000
11 Actual Fixed Overhead(Given) 73908
12 Standard Rate per hour(10/2) 6.05
13 Budgeted Fixed Overhead Cost at Actual Hours 77270.6
(Standard rate * Actual Hours)=(12*1)
14 Fixed Overhead Cost applied to products 75020
(standard rate*standard hours)=(2*12)
15 Fixed Overhead Spending Variance(11-13)(F) 3362.6
16 Fixed Overhead Volume Variance(13-14)(UF) 2250.6

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