Question 2 Variance analysis for Divine Denim

Helen has been using a standard cost system developed by Good Numbers and calculates the standard cost of a completed pair of RTW jeans as $72.00, as follows:

The fixed overhead rate is based on an estimated 600 units per month. Direct labour is nearly a fixed cost in this business. Selling and administrative costs are $4500 per month plus $2 per pair of jeans sold. The following information is for production during April:

Divine Denim’s policy is to record materials price variances at the time materials are purchased. Use a spreadsheet to perform calculations.

Required:

As an accountant working for Good Numbers use a spreadsheet to:

1. prepare a flexible cost budget for the month of April.
2. calculate all common direct cost variances.
3. calculate all common factory overhead variances.
4. calculate a total variance for the selling and administrative costs.
5. prepare a production cost variance report for April.
6. prepare a report that sums all the variances necessary to prepare the reconciling journal entry at the end of the period. Explain how you would close the total variance; that is, identify the account or accounts that would be affected, and whether expenses in the accounts will be increased or decreased to adjust the records for the total variance.
7. use information in the April production cost variance report (part v. above) to identify and describe questions Helen, the owner of Devine Denim, might have about April’s production costs.

Income Statements under Absorption and Variable Costing

Patagucci Inc. manufactures and sells athletic equipment. The company began operations on August 1, 2016, and operated at 100% of capacity (75,900 units) during the first month, creating an ending inventory of 6,900 units. During September, the company produced 69,000 garments but sold 75,900 units at $85 per unit. The September manufacturing costs and selling and administrative expenses were as follows:

a. Prepare an income statement according to the absorption costing concept for September.

b. Prepare an income statement according to the variable costing concept for September.

c. What is the reason for the difference in the amount of income from operations reported in (a) and (b)?

Under the absorption costing method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under variable costing , all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory decreases, the absorption costing income statement will have a lower income from operations.

High Desert Potteryworks makes a variety of pottery products that it sells to retailers. The company uses a job-order costing system in which departmental predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor-hours. At the beginning of the year, the company provided the following estimates:

Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job:

Required:

1. Compute the predetermined overhead rates used in the Molding Department and the Painting Department.

2. Compute the total overhead cost applied to Job 205.

3-a. What would be the total manufacturing cost recorded for Job 205?

3-b. If the job contained 22 units, what would be the unit product cost?

Complete this question by entering your answers in the tabs below.

• Req 1
• Req 2
• Req 3A
• Req 3B

Compute the Predetermined Overhead Rates used in the Molding Department and the Painting Department. (Round your answers to 2 decimal places.)

• Complete this question by entering your answers in the tabs below.

• Req 1
• Req 2
• Req 3A
• Req 3B

• Compute the total overhead cost applied to Job 205. (Round "Predetermined overhead rate" to 2 decimal places. Round other intermediate calculations and final answers to the nearest dollar amount.)

  	Total overhead cost

Stuck on the following questions. Multiple choice. One answer for each.

1. The primary goal of a publicly-owned firm interested in serving its stockholders should be to:

-Minimize the chances of losses

-Maximize share price

-Minimize expected EPS

-Minimize shareholder wealth

-Maximize expected total corporate profit

2. Which one of the following is an agency cost?

-Cost of dividend payments to stockholders

-Cost of interest payments to bondholders

-Cost of an internal audit required by bondholders

-Cost of wages for managers

-Cost of dividend payments to bondholders

The Welding Department of Majestic Company has the following production and manufacturing cost data for February 2020. All materials are added at the beginning of the process. Majestic uses the FIFO method to compute equivalent units.

Problem 15-1A Production costs computed and recorded; reports prepared LO C2, P1, P2, P3, P4

[The following information applies to the questions displayed below.]

rev: 02_06_2017_QC_CS-77766

References

Section BreakProblem 15-1A Production costs computed and recorded; reports prepared LO C2, P1, P2, P3, P4

1.

Problem 15-1A Part 1

2.

Problem 15-1A Part 2

Problem 15-1A Part 4

Green River Inc. established the following standards for its principal product, a kit to convert ordinary lawn mowers into mulching mowers:

Direct Materials:

Blades 2 blades @ $13 per blade

Adaptors 1 kit @ $6 per adaptor

Direct Labor:

Grinding ½ hour @ $14 per hour

Finishing & Testing 2/3 hour @ $12 per hour

Overhead

Variable (unit level) $8 per machine hour

Batch Level (total) 50 material moves @ $150 per move

Facility (total) 7,000 square feet @ $2 per square foot

The standard variable overhead cost per conversion kit is $2.

Traditionally, all overhead is applied on the basis of machine hours.

For ABC budgeting, one material move is allowed for every 100 kits produced. The budgeted fixed portion of the batch level cost is $500.

Planned production and sales for the year was 5,000 conversion kits. The planned selling price per kit is $50.

Actual Results

Kits produced & sold 5,200 (this is within the relevant range)

Actual selling price per kit $48

Materials:

Blades Purchased 11,300 blades @ $12.75 per blade

Blades Used 10,900 blades

Adaptors Purchased 5,900 @ $5.60 per adaptor

Adaptors Used 5,650 adaptors

Labor, Grinding 2,800 hours, total cost $42,000

Labor, Finishing & Testing 3,700 hours, total cost $45,325

Machine hours used 1,325 machine hours

Variable Overhead $11,455

Batch Level Overhead (total) $7,938 (54 moves)

Batch Level Overhead (variable) $7,200

Facility Level Overhead $14,500 (7,000 square feet)

A. Prepare the flexible manufacturing cost budget for the year’s actual output.

B. Calculate the sales variances.

C. Calculate the material variances.

D. Calculate the labor variances.

E. What is the unit quantity standard for variable overhead? In other words, how many machine hours are “allowed” for each conversion kit?

F. Calculate the variable (unit level and variable batch) and fixed (fixed batch and facility) overhead variances. Then sum them to get the total of each type of overhead variance. (One set of values for total variable OH variances, one set of values for total fixed OH variances).

G. Prepare appropriate journal entries for C, D, & F.

H. Calculate the total amount (variable, batch & fixed) of over or under applied overhead.

I.    Prepare the journal entries to close the variance accounts. The following balances before allocating variances are:

• Raw Materials,    $5,000
• WIP,                     $8,000
• Finished Goods, $12,000
• COGS,                $60,000

Kansas Supplies is a manufacturer of plastic parts that uses the weighted-average process costing method to account for costs of production. It produces parts in three separate departments: Molding, Assembling, and Packaging. The following information was obtained for the Assembling Department for the month of April.

Work in process on April 1 had 103,000 units made up of the following.

During April, 503,000 units were transferred in from the Molding Department at a cost of $663,960. The Assembling Department added the following costs.

Assembling finished 403,000 units and transferred them to the Packaging Department.

At April 30, 203,000 units were still in work-in-process inventory. The degree of completion of work-in-process inventory at April 30 was as follows.

Required:

a. Prepare a production cost report using the weighted-average method. (Round "Cost per equivalent unit" to 2 decimal places.)

Thakin Industries Inc. manufactures dorm furniture in separate processes. In each process, materials are entered at the beginning, and conversion costs are incurred uniformly. Production and cost data for the first process in making a product are as follows.

(a1)

Compute the physical units of production.

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(a2)

Compute equivalent units of production for materials and for conversion costs.

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(a3)

Determine the unit costs of production.

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(a4)

Show the assignment of costs to units transferred out and in process.

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(b)

Prepare the production cost report for July 2020.

Kansas Supplies is a manufacturer of plastic parts that uses the weighted-average process costing method to account for costs of production. It produces parts in three separate departments: Molding, Assembling, and Packaging. The following information was obtained for the Assembling Department for the month of April.

Work in process on April 1 had 114,000 units made up of the following:

During April, 514,000 units were transferred in from the Molding Department at a cost of $735,020. The Assembling Department added the following costs:

Assembling finished 414,000 units and transferred them to the Packaging Department.

At April 30, 214,000 units were still in work-in-process inventory. The degree of completion of work-in-process inventory at April 30 was as follows:

Required:

a. Prepare a production cost report using the weighted-average method. (Round "Cost per equivalent unit" to 2 decimal places.)

Thank You!!!