In: Accounting
Problem 23-2A (Part Level Submission) Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2017. Costs and Production Data Actual Standard Raw materials unit cost $2.40 $2.25 Raw materials units used 11,500 10,600 Direct labor payroll $177,600 $171,760 Direct labor hours worked 14,800 15,200 Manufacturing overhead incurred $202,000 Manufacturing overhead applied $205,200 Machine hours expected to be used at normal capacity 41,500 Budgeted fixed overhead for June $62,250 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 $495,000. Selling and administrative expenses were $39,300. Assume that the amount of raw materials purchased equaled the amount used.
repare an income statement for management. (Ignore income taxes.)
Material Price Variance = (Std price - Actual price)*Actual
Qty
= (2.25-2.4)*11500 = 2875 U
Material Qty Variance = (Std qty - Actual Qty)*Std price
=(10600-11500)*2.25 = 2025 U
Std labour rate per hour = 171760/15200 = 11.3
Actual labour rate per hour = 177600/14800 = 12
Labour Price variance = (std rate - actual rate)*Actual
hrs
= (11.3 - 12)*14800 = 10360 U
Labour efficiency variance = (Std hrs for actual production -
Actual hrs)*Std rate per hour
= (15200-14800)*11.3 = 4520 F
Total overhead variance = Actual overhead - Overhead
applied
= 202000 - (45600*4.30) =202000 - 196080 = 5920 F
Overhead applied = Machine hrs for direct labour hours * Overhead
rate
= (15200 DLhrs * 3 machine hrs ) * (3.0+1.3) = 45600*4.3 =
196080
INCOME STATEMENT
Sales
Revenue
495000
Less COGS (at
standard)
391690*
Gross
Profit
103310
Variances : -
Material
price 2875 U
Material
Qty 2025
U
Labour
Rate 10360
U
Labour Efficiency 4520 F
Overhead
5920 F
Total
Variance
4820 U
Gross Profit
Actual
98490
Less: Selling
Expenses
39300
Net
Profit
59190
*COGS (standard) = Material (10600*2.25) + Labour 171760 +
Overhead applied 196080
= 23850+171760+196080 = 391690