Jordan Corporation Inc. manufactures a single product and uses a standard cost system for control purposes. The standard cost card for the product is as follows:

Standard Cost Standard Cost Per Unit ($) Direct materials 2 metres @ $8.45 per metre $16.90 Direct labour 1.4 hours @ $16 per DLH 22.40 Variable overhead 1.4 hours @ $2.50 per DLH 3.50 Fixed overhead 1.4 hours @ $6 per DLH 8.40 Total cost $51.20 * DLH - Direct labour hours

Some additional information for the year just ended:

(i) A total of 30,000 units were manufactured during the year.

(ii) Total materials purchased and used during the year totalled 64,000 metres at a total cost of $547,200. There was no beginning direct materials inventory for the year.

(iii) Total direct labour cost incurred during the year amounted to $687,300 for a total of 43,500 hours worked.

The following data relates to manufacturing overhead costs:

Standard DLH required for budgeted level of production 35,000 hours Actual variable overhead costs $108,000 Actual fixed overhead costs $211,800

The CEO is very pleased with the performance of the production team, for having achieved a smaller than expected cost variance of only 1.2%. This is well within the threshold set of 3.0% of budgeted costs. He plans to recommend to the Board for all staff to be awarded bonuses for good cost control.

Required:

(a) Compute ALL the possible variances for the year based on the information given.

(b) Write journal entries to record ALL variances computed in (a) above (narrations are not required).

(c) Explain, by showing clear computations, how the CEO arrived at a cost variance of 1.2%. Do you agree with the CEO’s assessment that bonuses should be given to all staff for good cost control during the year? Explain.

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 6,800 units of product were as follows:

Each unit requires 0.25 hour of direct labor.

Required:

a. Determine the direct materials price variance, direct materials quantity variance, and 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.

b. Determine the direct labor rate variance, direct labor time variance, and 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.

c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 74,000 units of product were as follows:

Each unit requires 0.25 hour of direct labor.

Required:

a. Determine the direct materials price variance, direct materials quantity variance, and 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.

b. Determine the direct labor rate variance, direct labor time variance, and 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.

c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 78,000 units of product were as follows:

Each unit requires 0.25 hour of direct labor.

Required:

a. Determine the direct materials price variance, direct materials quantity variance, and 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.

b. Determine the direct labor rate variance, direct labor time variance, and 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.

c. Determine the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 74,000 units of product were as follows:

Each unit requires 0.25 hour of direct labor.

Required:

a. Determine the direct materials price variance, direct materials quantity variance, and 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.

b. Determine the direct labor rate variance, direct labor time variance, and 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.

c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 78,000 units of product were as follows:

Each unit requires 0.25 hour of direct labor.

Required:

a. Determine the direct materials price variance, direct materials quantity variance, and 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.

b. Determine the direct labor rate variance, direct labor time variance, and 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.

c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

23-3

1) Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 4,800 units of product were as follows:

Each unit requires 0.25 hour of direct labor.

Required:

a. Determine the direct materials price variance, direct materials quantity variance, and 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.

b. Determine the direct labor rate variance, direct labor time variance, and 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.

c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 70,000 units of product were as follows:

Each unit requires 0.25 hour of direct labor.

a. Determine the direct materials price variance, direct materials quantity variance, and 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.

b. Determine the direct labor rate variance, direct labor time variance, and 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.

c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 7,200 units of product were as follows:

Each unit requires 0.25 hour of direct labor.

Required:

a. Determine the direct materials price variance, direct materials quantity variance, and 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.

b. Determine the direct labor rate variance, direct labor time variance, and 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.

c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Question 2 – Comprehensive problem: Scoops Ahoy, Inc. is a manufacturer that produces ice cream. Its relevant range of production for 2019 is 101,000 to 106,000 pints of ice cream. When it produces and sells 104,000 pints, its average costs per unit are as follows:

1. What is the total cost of producing and selling 104,000 pints of ice cream? What is the total cost of producing and selling 105,000 pints of ice cream?   What is the total cost of producing and selling 102,000 pints of ice cream?

2. What is the total variable manufacturing cost of producing and selling 104,000 pints of ice cream? What is the total variable manufacturing cost of producing and selling 105,000 pints of ice cream?   What is the total variable manufacturing cost of producing and selling 102,000 pints of ice cream?

3. If 105,000 pints of ice cream are produced and sold, what is the fixed cost per unit produced and sold?   If 102,000 pints of ice cream are produced and sold, what is the fixed cost per unit produced and sold?

4. If 105,000 pints of ice cream are produced and sold, what is the non-manufacturing cost per unit produced and sold?   If 102,000 pints of ice cream are produced and sold, what is the non-manufacturing cost per unit produced and sold?

5. If the selling price is $3.50 per pint of ice cream, what is the contribution margin per unit when producing and selling 105,000 pints of ice cream?   If the selling price is $3.50 per pint of ice cream, what is the contribution margin per unit when producing and selling 102,000 pints of ice cream?