Direct Materials Variances
Bellingham Company produces a product that requires 14 standard pounds per unit. The standard price is $8.5 per pound. If 4,200 units required 57,000 pounds, which were purchased at $8.76 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) total direct materials cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
a. Direct materials price variance | $ | |
b. Direct materials quantity variance | $ | |
c. Total direct materials cost variance | $ |
Direct Labor Variances
Bellingham Company produces a product that requires 7 standard hours per unit at a standard hourly rate of $22.00 per hour. If 2,600 units required 18,600 hours at an hourly rate of $21.56 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) total direct labor cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
a. Direct labor rate variance | $ | |
b. Direct labor time variance | $ | |
c. Total direct labor cost variance | $ |
In: Accounting
Mastery Problem: Budgeting
LearnCo
LearnCo manufactures and sells one product, an abacus for classroom use, with two models, the Basic model and the Deluxe model. The company began operations on January 1, 20Y1, and is planning for 20Y2, its second year of operations, by preparing budgets from its master budget.
The company is trying to decide how many units to manufacture, how much it might spend on direct materials and direct labor, and what their factory overhead expenses might be. In addition, the company is interested in budgeting for selling and administrative costs, and in creating a budgeted income statement showing a prediction of net income for 20Y2.
You have been asked to assist the controller of LearnCo in preparing the 20Y2 budgets.
Sales Budget
The sales budget often uses the prior year’s sales as a starting point, and then sales quantities are revised for various factors such as planned advertising and promotion, projected pricing changes, and expected industry and general economic conditions. LearnCo has completed reviewing its prior year’s sales and has prepared the following sales budget.
After reviewing LearnCo’s sales budget, you note that three numbers have been omitted. The company’s controller has told you that the units sold for the Basic and Deluxe models are expected to be the same. Fill in the missing amounts.
LearnCo Sales Budget For the Year Ending December 31, 20Y2 |
|||
Product |
Unit Sales Volume |
Unit Selling Price |
Total Sales |
Basic Abacus | $6 | $216,000 | |
Deluxe Abacus | 504,000 | ||
Totals | 72,000 | $720,000 |
Production Budget
The production budget should be integrated with the sales budget to ensure that production and sales are kept in balance during the year. The production budget estimates the number of units to be manufactured to meet budgeted sales and desired inventory levels.
You note that LearnCo has omitted six numbers from the following production budget and fill in the missing amounts. You may need to use numbers from the sales budget you prepared.
LearnCo Production Budget For the Year Ending December 31, 20Y2 |
||
Units Basic | Units Deluxe | |
Expected units to be sold (from Sales Budget) | ||
Desired ending inventory, December 31, 20Y2 | 1,000 | 3,000 |
Total units available | ||
Estimated beginning inventory, January 1, 20Y2 | (1,050) | (2,100) |
Total units to be produced |
Direct Materials Purchases Budget
The direct materials purchases budget should be integrated with the production budget to ensure that production is not interrupted during the year.
Before you make any changes to the budget, you review the information on the following Direct Materials Data Table and enter the units to be produced from the Production Budget. After scanning the direct materials purchases budget (which follows the Direct Materials Data Table), you observe that LearnCo has omitted quite a few numbers from the budget. Fill in the missing amounts. You may need to use numbers from the Direct Materials Data Table, or from the sales budget and production budget you prepared. When required, round your answers to the nearest dollar.
Direct Materials Data Table | ||
Wood Pieces | Beads | |
Packages required per unit: | ||
Basic abacus | 1 | 2 |
Deluxe abacus | 2 | 3 |
Cost per package: | ||
Wood pieces | $0.25 | |
Beads | $0.25 | |
Units to be produced (from Production Budget): | ||
Basic abacus | ||
Deluxe abacus |
LearnCo Direct Materials Purchases Budget For the Year Ending December 31, 20Y2 |
|||
Direct Materials | |||
Wood Pieces | Beads | Total | |
Packages required for production: | |||
Basic abacus | |||
Deluxe abacus | |||
Desired inventory, December 31, 20Y2 | 2,200 | 5,000 | |
Total packages available | |||
Estimated inventory, January 1, 20Y2 | (3,500) | (4,500) | |
Total packages to be purchased | |||
Unit price (per package) | × $ | × $ | |
Total direct materials to be purchased | $ | $ | $72,888 |
Direct Labor Cost Budget
Direct labor needs from the direct labor cost budget should be coordinated between the production and personnel departments so that there will be enough labor available for production.
Before you make any changes to the budget, you review the information on the following Direct Labor Data Table and enter the units to be produced from the Production Budget. After scanning the Direct Labor Cost Budget (which follows the Direct Labor Data Table), you observe that LearnCo has omitted quite a few numbers from the budget. Fill in the missing amounts. You may need to use numbers from the Direct Labor Data Table, or from the sales budget, production budget, and direct materials purchase budget you prepared. When required, round your answers to the nearest dollar.
Direct Labor Data Table | ||
Gluing | Assembly | |
Hours required per unit: | ||
Basic abacus | 0.10 | 0.10 |
Deluxe abacus | 0.10 | 0.20 |
Labor hourly rate: | ||
Gluing | $12 | |
Assembly | $17 | |
Units to be produced (from Production Budget): | ||
Basic abacus | ||
Deluxe abacus |
LearnCo Direct Labor Cost Budget For the Year Ending December 31, 20Y2 |
|||
Gluing | Assembly | Total | |
Hours required for production: | |||
Basic abacus | |||
Deluxe abacus | |||
Total | |||
Hourly rate | × $ | × $ | |
Total direct labor cost | $ | $ | $273,995 |
Factory Overhead Cost Budget
The factory overhead cost budget should be integrated with the production budget to ensure that production is not interrupted during the year. This budget may be supported by departmental schedules, which normally separate factory overhead costs into fixed and variable costs so that department managers may monitor and evaluate costs during the year. For simplicity, LearnCo has not separated costs in this manner.
After reviewing the following factory overhead cost budget, you note that LearnCo has completed the budget with the exception of one amount. Fill in the missing amount.
LearnCo Factory Overhead Cost Budget For the Year Ending December 31, 20Y2 |
|
Indirect factory wages | $5,400 |
Power and light | |
Depreciation of plant and equipment | 1,450 |
Total factory overhead cost | $18,100 |
In: Accounting
Hancock Company, a merchandising company, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for the second quarter |
a. |
As of December 31 (the end of the prior quarter), the company’s balance sheet showed the following account balances: |
Cash |
$ |
13,100 |
||
Accounts receivable |
55,800 |
|||
Inventory |
18,620 |
|||
Buildings and equipment (net) |
135,000 |
|||
Accounts payable |
$ |
47,000 |
||
Common stock |
115,000 |
|||
Retained earnings |
60,520 |
|||
$ |
222,520 |
$ |
222,520 |
|
b. |
Actual and budgeted sales are as follows: |
December(actual) |
$ 93,000 |
January |
$ 133,000 |
February |
$ 194,000 |
March |
$ 102,000 |
April |
$ 100,000 |
c. |
Sales are 40% for cash and 60% on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable at December 31 are a result of December credit sales. |
d. |
The company's gross margin percentage is 30% of sales. (In other words, cost of goods sold is 70% of sales.) |
e. |
Each month's ending inventory should equal 20% of the following month's budgeted cost of goods sold. |
f. |
One-quarter of a month's inventory purchases is paid for in the month of purchase; the other three- quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory. |
g. |
Monthly expenses are as follows: commissions, $27,500; rent, $4,150; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $4,050 for the quarter and includes depreciation on new assets acquired during the quarter. |
h. |
Equipment will be acquired for cash: $5,330 in January and $9,600 in February. |
i. |
Management would like to maintain a minimum cash balance of $7,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $50,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter. |
Required: |
|
Using the data above, complete the following statements and schedules for the second quarter: |
|
1. |
Schedule of expected cash collections: |
2a. |
Merchandise purchases budget. |
2b. |
Schedule of expected cash disbursements for merchandise purchases: |
*Beginning balance of the accounts payable. |
3. |
Schedule of expected cash disbursements for selling and administrative expenses: |
4. |
Cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.) |
5. |
Prepare an absorption costing income statement for the quarter ending March 31. (Losses should be indicated by a minus sign.) |
6. |
Prepare a balance sheet as of March 31.(Round your answers to the nearest whole number.) |
In: Accounting
Problem 3-02A a-c, d1-d3 (Video) (Part Level Submission)
The Tamarisk, Inc. opened for business on May 1, 2020. Its trial balance before adjustment on May 31 is as follows.
Tamarisk, Inc. |
||||||
Account Number | Debit | Credit | ||||
101 | Cash | $ 3,500 | ||||
126 | Supplies | 2,150 | ||||
130 | Prepaid Insurance | 2,400 | ||||
140 | Land | 14,000 | ||||
141 | Buildings | 59,000 | ||||
149 | Equipment | 14,800 | ||||
201 | Accounts Payable | $ 11,400 | ||||
208 | Unearned Rent Revenue | 3,200 | ||||
275 | Mortgage Payable | 40,000 | ||||
311 | Common Stock | 35,500 | ||||
429 | Rent Revenue | 10,350 | ||||
610 | Advertising Expense | 550 | ||||
726 | Salaries and Wages Expense | 3,200 | ||||
732 | Utilities Expense | 850 | ||||
$100,450 | $100,450 |
In addition to those accounts listed on the trial balance, the
chart of accounts for Tamarisk, Inc. also contains the following
accounts and account numbers: No. 142 Accumulated
Depreciation—Buildings, No. 150 Accumulated Depreciation—Equipment,
No. 212 Salaries and Wages Payable, No. 230 Interest Payable, No.
619 Depreciation Expense, No. 631 Supplies Expense, No. 718
Interest Expense, and No. 722 Insurance Expense.
Other data:
1. | Prepaid insurance is a 1-year policy starting May 1, 2020. | |
2. | A count of supplies shows $800 of unused supplies on May 31. | |
3. | Annual depreciation is $2,952 on the buildings and $1,476 on equipment. | |
4. | The mortgage interest rate is 12%. (The mortgage was taken out on May 1.) | |
5. | Two-thirds of the unearned rent revenue has been earned. | |
6. | Salaries of $800 are accrued and unpaid at May 31. |
Journalize the adjusting entries on May 31. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.)
In: Accounting
In: Accounting
**NEED ASSISTANCE WITH REQ 4,5,6
Milo Company manufactures beach umbrellas. The company is preparing detailed budgets for the third quarter and has assembled the following information to assist in the budget preparation:
The Marketing Department has estimated sales as follows for the remainder of the year (in units):
July | 39,000 | October | 29,000 |
August | 88,000 | November | 15,500 |
September | 57,000 | December | 16,000 |
The selling price of the beach umbrellas is $15 per unit.
All sales are on account. Based on past experience, sales are collected in the following pattern:
30% | in the month of sale |
65% | in the month following sale |
5% | uncollectible |
Sales for June totaled $555,000.
The company maintains finished goods inventories equal to 15% of the following month’s sales. This requirement will be met at the end of June.
Each beach umbrella requires 4 feet of Gilden, a material that is sometimes hard to acquire. Therefore, the company requires that the ending inventory of Gilden be equal to 50% of the following month’s production needs. The inventory of Gilden on hand at the beginning and end of the quarter will be:
June 30 | 92,700 | feet |
September 30 | ? | feet |
Gilden costs $0.80 per foot. One-half of a month’s purchases of Gilden is paid for in the month of purchase; the remainder is paid for in the following month. The accounts payable on July 1 for purchases of Gilden during June will be $66,920.
Required:
1. Calculate the estimated sales, by month and in total, for the third quarter.
2. Calculate the expected cash collections, by month and in total, for the third quarter.
3. Calculate the estimated quantity of beach umbrellas that need to be produced in July, August, September, and October.
4. Calculate the quantity of Gilden (in feet) that needs to be purchased by month and in total, for the third quarter.
5. Calculate the cost of the raw material (Gilden) purchases by month and in total, for the third quarter.
6. Calculate the expected cash disbursements for raw material (Gilden) purchases, by month and in total, for the third quarter.
In: Accounting
Dean and Brittany are both 32 years old and have a three-year old child, Eddie. They came to your office and asked you to build a financial statement analysis for 2017, based on the information provided.
Based on the above the information (total 5 points):
1) Make a balance sheet for Dean and Brittany (total asset-0.5 pt; total liabilities-0.5 pt; net worth-1 pt), and
2) Report the following financial ratios: (a) Current Ratio (1 pt); (b) Emergency Fund Ratio (1 pt); and (c) Savings Ratio (1 pt).
Please Show your calculations in excel with functions THANK YOU!
In: Accounting
Match these 10 frauds/schemes with the corresponding definitions/scenarios. On the homework assessment, the definitions will have multiple choice options.
Skimming, payroll fraud scheme, lapping, illegal gratuities, investment scam, expense scheme, disbursement fraud, check tampering, asset misappropriation, billing scheme.
In: Accounting
At the beginning of his current tax year David invests $12,000 in original issue U.S. Treasury bonds with a $10,000 face value that mature in exactly 10 years. David receives $700 in interest ($350 every six months) from the Treasury bonds during the current year and the yield to maturity on the bonds is 5 percent.
a. How much interest income will he report this year if he elects to amortize the bond premium?
b. How much interest will he report this year if he does not elect to amortize the bond premium?
In: Accounting
Data pertaining to the current position of Lucroy Industries Inc. are as follows:
Cash | $417,500 |
Marketable securities | 182,500 |
Accounts and notes receivable (net) | 340,000 |
Inventories | 750,000 |
Prepaid expenses | 48,000 |
Accounts payable | 190,000 |
Notes payable (short-term) | 240,000 |
Accrued expenses | 295,000 |
Required:
1. Compute (a) the working capital, (b) the current ratio, and (c) the quick ratio. Round ratios to one decimal place.
a. Working capital | $1,013,000 |
b. Current ratio | 2.4 |
c. Quick ratio | 1.3 |
2. Compute the working capital, the current ratio, and the quick ratio after each of the following transactions, and record the results in the appropriate columns. Consider each transaction separately and assume that only that transaction affects the data given. Round ratios to one decimal place.
Transaction | Working Capital | Current Ratio | Quick Ratio | ||
a. Sold marketable securities at no gain or loss, $80,000. | $1,013,000 | 1.3 | |||
b. Paid accounts payable, $125,000. | 1,013,000 | ||||
c. Purchased goods on account, $125,000. | 1,013,000 | ||||
d. Paid notes payable, $110,000. | 1,013,000 | ||||
e. Declared a cash dividend, $135,000. | |||||
f. Declared a common stock dividend on common stock, $45,000. | |||||
g. Borrowed cash from bank on a long-term note, $225,000. | |||||
h. Received cash on account, $110,000. | 1,013,000 | 1.3 | |||
i. Issued additional shares of stock for cash, $580,000. | |||||
j. Paid cash for prepaid expenses, $11,000. | 1,013,000 |
In: Accounting
Exercise 5.8 (Algorithmic) Characteristics of Production Process, Cost Measurement Vince Melders, of EcoScape Company, designs and installs custom lawn and garden irrigation systems for homes and businesses throughout the state. Each job is different, requiring different materials and labor for installing the systems. EcoScape estimated the following for the year: Number of direct labor hours 6,720 Direct labor cost $67,200 Overhead cost $50,400 During the year, the following actual amounts were experienced: Number of direct labor hours 6,045 Direct labor incurred $66,495 Overhead incurred $50,500 Vince Melders, owner of EcoScape, noticed that the watering systems for many houses in a local subdivision had the same layout and required virtually identical amounts of prime cost. Vince met with the subdivision builders and offered to install a basic watering system in each house. The idea was accepted enthusiastically, so Vince created a new company, Irrigation Specialties, to handle the subdivision business. In its first three months in business, Irrigation Specialties experienced the following: June July August Number of systems installed 68 88 108 Direct materials used $21,216 $27,456 $33,696 Direct labor incurred $14,144 $18,304 $22,464 Overhead $12,729.60 $12,812.80 $13,478.40 Required: 1. Should Irrigation Specialties use process costing or job-order costing? 2. If Irrigation Specialties uses an actual costing system, what is the cost of a single system installed in June? In July? In August? Round your answers to the nearest dollar. June $ per system July $ per system August $ per system 3. Now assume that Irrigation Specialties uses a normal costing system. Estimated overhead for the year is $46,800, and estimated production is 520 watering systems. What is the predetermined overhead rate per system? $ per system installed What is the cost of a single system installed in June? In July? In August? June $ per system July $ per system August $ per system
In: Accounting
Majer Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 6.3 ounces $ 4.00 per ounce $ 25.20 Direct labor 0.3 hours $ 19.00 per hour $ 5.70 Variable overhead 0.3 hours $ 4.00 per hour $ 1.20 The company reported the following results concerning this product in February. Originally budgeted output 5,800 units Actual output 8,600 units Raw materials used in production 30,900 ounces Actual direct labor-hours 1,990 hours Purchases of raw materials 33,300 ounces Actual price of raw materials $ 102.90 per ounce Actual direct labor rate $ 112.40 per hour Actual variable overhead rate $ 4.90 per hour The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead efficiency variance for February is:
In: Accounting
Scribners Corporation produces fine papers in three production departments—Pulping, Drying, and Finishing. In the Pulping Department, raw materials such as wood fiber and rag cotton are mechanically and chemically treated to separate their fibers. The result is a thick slurry of fibers. In the Drying Department, the wet fibers transferred from the Pulping Department are laid down on porous webs, pressed to remove excess liquid, and dried in ovens. In the Finishing Department, the dried paper is coated, cut, and spooled onto reels. The company uses the weighted-average method in its process costing system. Data for March for the Drying Department follow:
Percent Completed | ||||||
Units | Pulping | Conversion | ||||
Work in process inventory, March 1 | 3,200 | 100 | % | 80 | % | |
Work in process inventory, March 31 | 4,800 | 100 | % | 75 | % | |
Pulping cost in work in process inventory, March 1 | $ | 1,808 | ||||
Conversion cost in work in process inventory, March 1 | $ | 1,248 | ||||
Units transferred to the next production department | 174,200 | |||||
Pulping cost added during March | $ | 103,802 | ||||
Conversion cost added during March | $ | 75,206 | ||||
No materials are added in the Drying Department. Pulping cost represents the costs of the wet fibers transferred in from the Pulping Department. Wet fiber is processed in the Drying Department in batches; each unit in the above table is a batch and one batch of wet fibers produces a set amount of dried paper that is passed on to the Finishing Department.
Required:
1. Compute the Drying Department's equivalent units of production for pulping and conversion in March.
2. Compute the Drying Department's cost per equivalent unit for pulping and conversion in March.
3. Compute the Drying Department's cost of ending work in process inventory for pulping, conversion, and in total for March.
4. Compute the Drying Department's cost of units transferred out to the Finishing Department for pulping, conversion, and in total in March.
5. Prepare a cost reconciliation report for the Drying Department for March.
In: Accounting
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows:
Year 1 | Year 2 | ||||
Sales (@ $63 per unit) | $ | 1,197,000 | $ | 1,827,000 | |
Cost of goods sold (@ $38 per unit) | 722,000 | 1,102,000 | |||
Gross margin | 475,000 | 725,000 | |||
Selling and administrative expenses* | 311,000 | 341,000 | |||
Net operating income | $ | \164,000\ | $ | 384,000 | |
$3 per unit variable; $254,000 fixed each year. The company’s $38 unit product cost is computed as follows:
Direct materials | $ | 7 |
Direct labor | 10 | |
Variable manufacturing overhead | 3 | |
Fixed manufacturing overhead ($432,000 ÷ 24,000 units) | 18 | |
Absorption costing unit product cost | $ | 38 |
Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings.
Production and cost data for the first two years of operations are:
Year 1 | Year 2 | |
Units produced | 24,000 | 24,000 |
Units sold | 19,000 | 29,000 |
Required:
1. Using variable costing, what is the unit product cost for both years?
2. What is the variable costing net operating income in Year 1 and in Year 2?
3. Reconcile the absorption costing and the variable costing net operating income figures for each year.
In: Accounting
Advanced Pharmaceuticals, Inc., is a wholesale distributor of prescription drugs to independent retail and hospital-based pharmacies. Management believes that top-notch customer representatives are the key factor in determining whether the company will be successful in the future. Customer representatives serve as the company’s liaison with customers—helping pharmacies monitor their stocks, delivering drugs when customer stocks run low, and providing up-to-date information on drugs from many different companies. Customer representatives must be ultra-reliable and are highly trained. Good customer representatives are hard to come by and are not easily replaced. Customer representatives routinely record the amount of time they spend serving each pharmacy. This time includes travel time to and from the company’s central warehouse as well as time spent replenishing stocks, dealing with complaints, answering questions about drugs, informing pharmacists of the latest developments and newest products, reviewing bills, explaining procedures, and so on. Some pharmacies require more hand-holding and attention than others and consequently they consume more of the representatives’ time. Recently, customer representatives have made more frequent complaints that it is impossible to do their jobs without working well beyond normal working hours. This has led to an alarming increase in the number of customer representatives quitting for jobs in other organizations. As a consequence, management is considering dropping some customers to reduce the workload on customer representatives. Data concerning a representative sample of the company’s customers appears below: Leafcrest Pharmacy Providence Hospital Pharmacy Madison Clinic Pharmacy Jenkins Pharmacy Total revenues $328,860 $3,056,380 $1,487,010 $208,550 Cost of drugs sold $232,470 $2,248,480 $1,133,440 $129,920 Customer service costs $10,710 $76,500 $45,500 $7,980 Customer representative time 255 1,380 630 150 Customer service costs include all of the costs—other than the costs of the drugs themselves—that could be avoided by dropping the customer. These costs include the hourly wages of the customer representatives, their sales commissions, the mileage-related costs of the customer representatives’ company-provided vehicles, and so on. Required: 1. Rank the four customers in terms of their profitability. 2. Customer representatives are currently paid $40 per hour plus a commission of 1% of sales revenues. If these four pharmacies are indeed representative of the company’s customers, could the company afford to pay its customer representatives more in order to retain them? Yes No
In: Accounting