Question

Clothing manufactures embroidered jackets. The company uses a standard cost system to control manufacturing costs. The following data represent the standard unit cost of a​ jacket:     

Direct materials (			3.0	sq. ft x		$4.10		per sq. ft.). . . .		$12.30
Direct labor		(	2.0	hours x		$9.30		per hour). . . . .		18.60
Manufacturing overhead:
Variable	(	2.0	hours x		$0.66		per hour). . . . . . . . . .		$1.32
Fixed	(	2.0	hours x		$2.10		per hour). . . . . . . . . .		4.20	5.52
Total standard cost per jacket. . . . . . . . . . . . . . . . . . . . . . . . . .										$36.42

Fixed overhead in total was budgeted to be $62,400 for each month.

Actual data for November of the current year include the​ following:

a.	Actual production was 13,700 jackets.
b.	Actual direct materials used was 2.60 square feet per jacket at an actual cost of $4.20 per square foot. ​(Assume the direct materials purchased is the same as the direct materials​ used.)
c.	Actual direct labor usage of 25,200 hours for a total cost of $239,400.
d.	Actual fixed overhead cost was $53,634​, while actual variable overhead cost was $21,420.

Requirement 1. Compute the price and quantity variances for direct materials. ​(Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variances as favorable​ (F) or unfavorable​ (U). Abbreviations​ used: DM​ = Direct​ materials.)

Begin by determining the formula for the price​ variance, then compute the price variance for direct materials.

	Actual quantity purchased	x (	Actual price	-	Standard price	)	=	DM price variance
		x (		-		)	=

Now determine the formula for the quantity variance and compute the quantity variance for direct materials.

	Standard price	x (	Actual quantity used	-	Standard quantity allowed	)	=	DM quantity variance
		x (		-		)	=

Requirement 2. Compute the rate and efficiency variances for direct labor. ​(Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variances as favorable​ (F) or unfavorable​ (U). Abbreviations​ used: DL​ = Direct​ labor.)

Determine the formula for the rate​ variance, then compute the rate variance for direct labor.

	Actual hours	x (	Actual rate	-	Standard rate	)	=	DL rate variance
		x (		-		)	=

Determine the formula for the efficiency​ variance, then compute the efficiency variance for direct labor.

	Standard rate	x (	Actual hours	-	Standard rate	)	=	DL efficiency variance
		x (		-		)	=

Requirement 3. Compute the rate and efficiency variances for variable overhead. ​(Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variances as favorable​ (F) or unfavorable​ (U).)

Determine the formula for the rate​ variance, then compute the variable manufacturing overhead rate variance.

								Variable overhead
	Actual hours	x (	Actual rate	-	Standard rate	)	=	rate variance
		x (		-		)	=

Determine the formula for the efficiency​ variance, then compute the variable overhead efficiency variance.

								Variable overhead
	Standard rate	x (	Actual hours	-	Standard hours allowed	)	=	efficiency variance
		x (		-		)	=

Requirement 4. Compute the fixed overhead budget variance and the fixed overhead volume variance. ​(Enter the variances as positive numbers. Label the variances as favorable​ (F) or unfavorable​ (U). Abbreviations​ used: MOH​ = Manufacturing​ overhead)

Determine the formula for the fixed overhead budget​ variance, then compute the budget variance for fixed overhead.

					Fixed MOH
	Actual fixed overhead	-	Budgeted fixed overhead	=	budget variance
		-		=

Determine the formula for the fixed overhead volume​ variance, then compute the volume variance for fixed overhead.

					Fixed MOH
		-	Budgeted fixed overhead	=	volume variance
		-		=

Requirement 5. Company management intentionally purchased superior materials for November production. How did this decision affect the other cost​ variances? Overall, was the decision​ wise? Explain.

The favorable

▼

variances more than offset the unfavorable

▼

efficiency, budget, and fixed volume

price, rate, and fixed volume

price, rate, and quantity

quantity, rate, and budget

variances. If the superior materials purchased for the November production decreased materials and labor​ usage, then​ management's decision was

▼

unwise.

wise.

Requirement 6. Journalize the usage of direct materials and the assignment of direct​ labor, including the related variances. ​(Record debits​ first, then credits. Exclude explanations from any journal​ entries.)

​First, journalize the purchase of direct​ materials, including the related variance.

Journal Entry
		Accounts	Debit	Credit

Journalize the usage of direct​ materials, including the related variance.

Journal Entry
		Accounts	Debit	Credit

Journalize the direct labor​ costs, including the related variances.  ​(Record both direct labor variances by preparing a single compound​ entry.)

Journal Entry
Date		Accounts	Debit	Credit

Choose from any list or enter any number in the input fields and then continue to the next question.

Answer 1

Actual quantity purchased	x (	Actual price	-	Standard price		)	=	DM price variance
35620		4.2		4.1			)	3562	u
13700x2.6
quantity variance and compute the quantity variance for direct materials.
	Standard price	x (	Actual quantity used	-	Standard quantity allowed		)	=	DM quantity variance
	4.1		35620		41100				22468	F
					13700x3
labor rate vraince
	Actual hours		x (	Actual rate	-	Standard rate	)	=	DL rate variance
	25200		x (	9.5	-	9.3	)	=	5040	U
efficiency variance				239400/25200
	Standard rate	x (	Actual hours	-	Standard rate		)	=	DL efficiency variance
	9.3	x (	25200	-	27400		)	=	20460	F
					13700X 2
VOH Rate variance
							Variable overhead
	Actual hours		x (	Actual rate	-	Standard rate	)	=	rate variance
	25200		x (	0.85	-	0.66	)	=	4788	U
				21420/25200
voh efficiency variance									Variable overhead
	Standard rate	x (	Actual hours	-	Standard hours allowed		)	=	efficiency variance
	0.66		25200		27400				1452	F
			Fixed MOH
	Actual fixed overhead	-	Budgeted fixed overhead		=	budget variance
	53634	-	62400		=	8766	F
fixed overhead volume​ variance
						Fixed MOH
	Applied overhead	-	Budgeted fixed overhead		=	volume variance
	57540		62400			4860	u
	13700x2x2.1
price, rate and fixed volume
unwise
	DR	CR
Raw material inventory	146042
material price variance	3562
accounts payable		149604
work in process	168510
material usage variance		22468
raw material inventory		146042
work in process	254820
labor rat evariance	5040
labor efficiency variance		20460
wages payable		239400
if any doubt please comment