Question

In: Accounting

Maple Leaf Production manufactures truck tires. The following information is available for the last operating period....

Maple Leaf Production manufactures truck tires. The following information is available for the last operating period.

  • Maple Leaf produced and sold 92,000 tires for $40 each. Budgeted production was 96,000 tires.
  • Standard variable costs per tire follow:
Direct materials: 4 pounds at $3.00 $ 12.00
Direct labor: 0.30 hours at $15.50 4.65
Variable production overhead: 0.20 machine-hours at $18 per hour 3.60
Total variable costs $ 20.25
  • Fixed production overhead costs:

Monthly budget $1,410,000

  • Fixed overhead is applied at the rate of $16 per tire.
  • Actual production costs:
Direct materials purchased and used: 391,000 pounds at $2.70 $ 1,055,700
Direct labor: 21,500 hours at $15.80 339,700
Variable overhead: 19,000 machine-hours at $18.30 per hour 347,700
Fixed overhead 1,432,000

Required:

a. Prepare a cost variance analysis for each of the variable costs for Maple Leaf Productions. (Indicate the effect of each variance by "F" for favorable, or "U" for unfavorable.)

b. Prepare a fixed overhead cost variance analysis. (Indicate the effect of each variance by "F" for favorable, or "U" for unfavorable.)

c. (Appendix) Prepare the journal entries to record the activity for the last period using standard costing. Assume that all variances are closed to cost of goods sold at the end of the operating period.

Solutions

Expert Solution

Solution:

Material Price Variance - TAKE THE PURCHASED UNITS
Material Cost/Price Variance Actual Quantity(Standard Cost-Actual Cost)
Actual Quantity 391000
Standard Cost 3.00
Actual Cost 2.70
Material Cost/Price Variance 117300 Favorable
Material Quantity/ Efficiency Variance Standard Cost ( Standard Quantity - Actual Quantity)
Standard Cost 3
Standard Quantity 368000
Actual Quantity 391000
Material Quantity/ Efficiency Variance -69000 Unfavorable
Direct Labor Rate Variance Actual Labor hours(Standard Rate - Actual Rate)
Actual Labor hours 21500
Standard Rate 15.5
Actual Rate 15.8
Direct Labor Rate Variance -6450 Unfavorable
Labor Efficiency Variance Statndard Rate(Standard Hours - Actual Hours)
Standard Rate 15.5
Standard Hours 27600
Actual Hours 21500
Labor Efficiency Variance 94550 Favorable
Variable Cost
Manufacturing Overhead Spending Variance (Actual hours worked × Actual rate) – (Actual hours worked × Standard rate)
Actual Hours 19000
Actual rate 18.30
Standard rate 18
Manufacturing Overhead Spending Variance -5700 Unfavorable
Manufacturing Overhead volume Variance (Actual hours worked × Standard rate) – (Standard hours allowed × Standard rate)
Actual Hours 19000
Actual rate 18.30
Standard rate 18
Standard Hours 18400
Manufacturing Overhead volume Variance -10800 Unfavorable
Fixed Cost
Fixed MAnufacturing Spending Variance Budgeted Fixed Overhead - Actual Fixed Overhead
Actual Fixed Overhead 1432000
Standard rate 16
Budgeted tires for Budgeted Production (1410000/16) 88125
Manufacturing Overhead Spending Variance -22000 Unfavorable
Fixed Manufacturing volume Variance Budgeted Fixed Overhead - Applied/Absorbed OH
Budgeted tires for Budgeted Production 88125
Standard rate 16
Actual Production 92000
Manufacturing Overhead volume Variance 62000 Favorable
Journal Entries
Raw Materials 1173000
Direct Material Cost Variance 117300
Accounts payable 1055700
(To Record Price Variance)
Work in Process 1104000
Direct Material Efficiency Variance 69000
     Raw Material 1173000
(To record Quantity Variance)
Work in Process 427800
Direct Labor Cost Variance 6450
Direct Labor Efficiency Variance 94550
           Factory Labor 339700
(To record labor variances)
Manufacturing Overhead 1779700
   Various Accounts 1779700
(To record Manufacturing Overhead incurred)
Work in Process 1803200
   Manufacturing Overhead 1803200
(To record overhead applied - (16*92000tires)+(18400hours*18))
Variable Overhead Efficiency Variance 10800
Variable Overhead Cost Variance 5700
Fixed Overhead Cost Variance 22000
Manufacturing Overhead (1803200-1779700) 23500
       Fixed Overhead Efficiency Variance 62000

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