Ch. 10 Managerial Accounting Ever Green Solutions

9/14/2014
Assignment Print View
Score: 60
1.
out of 60 points (100%)
award:
10 out of
10.00
points
Barberry, Inc., manufactures a product called Fruta. The company uses a standard cost system and has
established the following standards for one unit of Fruta:
Direct materials
Direct labor
Variable manufacturing overhead
Standard
Quantity
1.5 pounds
0.7 hours
0.7 hours
Standard Price
or Rate
$ 5.60 per pound
$11.90 per hour
$ 2.80 per hour
Standard
Cost
$ 8.40
8.33
1.96
$ 18.69
During June, the company recorded this activity related to production of Fruta:
a. The company produced 4,100 units during June.
b. A total of 9,380 pounds of material were purchased at a cost of $49,714.
c. There was no beginning inventory of materials; however, at the end of the month, 2,000 pounds of
material remained in ending inventory.
d. The company employs 10 persons to work on the production of Fruta. During June, they worked an
average of 237 hours at an average rate of $12.60 per hour.
e. Variable manufacturing overhead is assigned to Fruta on the basis of direct labor-hours. Variable
manufacturing overhead costs during June totaled $6,162.
The company's management is anxious to determine the efficiency of Fruta production activities.
Required:
1. For direct materials:
a. Compute the price and quantity variances. (Input all amounts as positive values. Do not round
intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required.
Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and
"None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)
Materials price variance
Materials quantity variance
$ 2,814
$ 6,888
F
U
b. The materials were purchased from a new supplier who is anxious to enter into a long term
purchase contract. Would you recommend that the company sign the contract?
No
2. For labor employed in the production of Fruta:
a. Compute the rate and efficiency variances. (Input all amounts as positive values. Leave no
cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance
by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero
variance). Omit the "$" sign in your response.)
Labor rate variance

Labor efficiency variance
$ 1,659
$ 5,950
U
F
b. In the past, the 10 persons employed in the production of Fruta consisted of 4 senior workers and
http://ezto.mheducation.com/hm_accounting.tpx?todo=printview
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6 assistants. During June, the company experimented with 5 senior workers and 5 assistants.
Would you recommend that the new labor mix be continued?
Yes
3a. Compute the variable overhead rate and efficiency variances. (Input all amounts as positive
values. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0"
wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for
unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your
response.)
Variable overhead rate variance
Variable overhead efficiency variance
$ 474
$ 1,400
F
F
Worksheet
Learning Objective: 10-02 Compute the

direct labor efficiency and rate variances
and explain their significance.

direct materials quantity and price
variances and explain their significance.

variable manufacturing overhead
efficiency and rate variances and explain
their significance.
Barberry, Inc., manufactures a product called Fruta. The company uses a standard cost system and has
established the following standards for one unit of Fruta:
Direct materials
Direct labor
Standard
Quantity
1.5 pounds
0.7 hours
0.7 hours
Standard Price
or Rate
$ 5.60 per pound
$11.90 per hour
$ 2.80 per hour
Standard
Cost
$ 8.40
8.33
1.96
$ 18.69
During June, the company recorded this activity related to production of Fruta:
a. The company produced 4,100 units during June.
b. A total of 9,380 pounds of material were purchased at a cost of $49,714.
c. There was no beginning inventory of materials; however, at the end of the month, 2,000 pounds of
material remained in ending inventory.
d. The company employs 10 persons to work on the production of Fruta. During June, they worked an
average of 237 hours at an average rate of $12.60 per hour.
e. Variable manufacturing overhead is assigned to Fruta on the basis of direct labor-hours. Variable
manufacturing overhead costs during June totaled $6,162.
The company's management is anxious to determine the efficiency of Fruta production activities.
Required:
1. For direct materials:
a. Compute the price and quantity variances. (Input all amounts as positive values. Do not round
intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required.
"None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)
$
$
2,814
6,888
F
U
b. The materials were purchased from a new supplier who is anxious to enter into a long term
purchase contract. Would you recommend that the company sign the contract?
No
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9/14/2014
2. For labor employed in the production of Fruta:

a. Compute the rate and efficiency variances. (Input all amounts as positive values. Leave no
cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance
Labor rate variance
$
$
1,659
5,950
U
F
b. In the past, the 10 persons employed in the production of Fruta consisted of 4 senior workers and
6 assistants. During June, the company experimented with 5 senior workers and 5 assistants.
Would you recommend that the new labor mix be continued?
Yes
3a. Compute the variable overhead rate and efficiency variances. (Input all amounts as positive
values. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0"
wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for
unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your
response.)
$
$
474
1,400
F
F
Explanation:
1.
a.
In the solution below, the materials price variance is computed on the entire amount of materials
purchased, whereas the materials quantity variance is computed only on the amount of materials used in
production:
Standard Quantity Allowed
for Actual Output,
at Standard Price
(SQ SP)
Actual Quantity of
Input, at
Standard Price
(AQ SP)
Actual Quantity
of Input,
at Actual Price
(AQ AP)
6,150 pounds*
$5.60 per pound
= $34,440
7,380 pounds
$5.60 per pound
= $41,328
$49,714
Materials quantity
variance = $6,888 U
9,380 pounds
$5.60 per pound
= $52,528
= $2,814 F
*4,100 units 1.5 pounds per unit = 6,150 pounds
1.
b.
No, the contract should probably not be signed. Although the new supplier is offering the material at only
$5.30* per pound, the large materials quantity variance indicates a problem using these materials in
production. The company still has 2,000 pounds of unused material in the warehouse; if these materials
do as poorly in production as the 7,380 pounds already used, the total quantity variance on the 9,380
pounds of materials purchased will be very large.
*$49,714 9,380 pounds = $5.30 per pound
2.
a.
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9/14/2014
Standard Hours Allowed

for Actual Output,
at Standard Rate
(SH SR)
Actual Hours
of Input,
at Standard Rate
(AH SR)
Actual Hours
of Input,
at Actual Rate
(AH AR)
2,870 hours*
$11.90 per hour
= $34,153
2,370 hours**
$11.90 per hour
= $28,203
2,370 hours**
$12.60 per hour
= $29,862

= $5,950 F
Labor rate variance

= $1,659 U
Spending variance = $4,291 F

*4,100 units .70 hours per unit = 2,870 hours
**10 workers 237.00 hours per worker = 2,370 hours
2.
b.
Yes, the new labor mix should probably be continued. Although it increases the average hourly labor cost
from $11.90 to $12.60, resulting in an $1,659 unfavorable labor rate variance, this is more than offset by
greater efficiency of labor time. Notice that the labor efficiency variance is $5,950 favorable. Thus, the
new labor mix reduces overall labor costs.
3a.

for Actual Output,
at Standard Rate
(SH SR)
Actual Hours
of Input,
at Standard Rate
(AH SR)
Actual Hours
of Input,
at Actual Rate
(AH AR)
2,870 hours
$2.80 per hour
= $8,036
2,370 hours
$2.80 per hour
= $6,636
$6,162
Variable overhead
efficiency variance
= $1,400 F
Variable overhead
rate variance
= $474 F
2.
award:
10 out of
10.00
points
Full credit for this question has been awarded to all

students
3.
award:
10 out of
10.00
points
Vitalite, Inc., produces a number of products, including a body-wrap kit. Standard variable costs relating
to a single kit are given below:
Direct materials
Direct labor
Standard Quantity
or Hours
?
?
Standard Price
or Rate
$4 per yard
?
Standard
Cost
$?
?
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9/14/2014
$2 per direct
labor-hour
Total standard cost per kit
?
$47
During August, 400 kits were manufactured and sold. Selected information relating to the months
production is given below:
Total standard cost*

Actual costs incurred
Labor rate variance
Materials Used
?
$8,000
?
$ 4,400 U
Direct Labor
$5,400
?
Variable
Manufacturing
Overhead
$1,800
$1,820
?
?
?
?
*For the month's production.

The following additional information is available for Augusts production of kits:
Actual direct labor-hours

Difference between standard and actual cost per kit produced during August
1,000
$.17 U
Required:
1. What was the total standard cost of the materials used during August? (Omit the "$" sign in your
response.)
Standard cost
$ 11,600
2. How many yards of material are required at standard per kit? (Do not round intermediate
calculations. Round your final answer to 2 decimal places.)
Number of yards
7.25
yards per kit
3. What was the materials price variance for August if there were no beginning or ending inventories of
materials? (Input all amounts as positive values. Do not round intermediate calculations. Leave
no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance
Material price variance
$ 8,000
4. What is the standard direct labor rate per hour? (Omit the "$" sign in your response.)
Standard direct labor rate
$6
per DLH
5. What was the labor rate variance for August? The labor efficiency variance? (Input all amounts as
positive values. Do not round intermediate calculations. Leave no cells blank - be certain to
enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable,
"U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your
response.)
Labor rate variance
$ 3,048
$ 600
U
U
6. What was the variable overhead rate variance for August? The variable overhead efficiency variance?
(Input all amounts as positive values. Do not round intermediate calculations. Leave no cells
blank - be certain to enter "0" wherever required. Indicate the effect of each variance by
selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).
Omit the "$" sign in your response.)
Variable overhead efficiency
$ 180
$ 200
U
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variance
7. Complete the standard cost card for one kit shown at the beginning of the problem. (Do not round
intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your
response.)
Standard Quantity
or Hours
7.25
yards
2.25
hours
2.25
hours
Direct materials
Direct labor
Standard Price or Rate

$4 per yard
$ 6.00
per hour
$2 per direct labor-hour
Standard Cost
$ 29.00
13.50
4.50
$47
rev: 04_27_2012
Worksheet



their significance.
Vitalite, Inc., produces a number of products, including a body-wrap kit. Standard variable costs relating
to a single kit are given below:
Direct materials
Direct labor
Standard Quantity
or Hours
?
?
?
Standard Price
or Rate
$4 per yard
?
$2 per direct
labor-hour
Standard
Cost
$?
?
?
$47
During August, 400 kits were manufactured and sold. Selected information relating to the months
production is given below:
Total standard cost*

Actual costs incurred
Labor rate variance
Materials Used
?
$8,000
?
$ 4,400 U
Direct Labor
$5,400
?
Variable
Manufacturing
Overhead
$1,800
$1,820
?
?
?
?
*For the month's production.

The following additional information is available for Augusts production of kits:
Difference between standard and actual cost per kit produced during August
1,000
$.17 U
Required:
1. What was the total standard cost of the materials used during August? (Omit the "$" sign in your
response.)
Standard cost
11,600
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9/14/2014
2. How many yards of material are required at standard per kit? (Do not round intermediate
calculations. Round your final answer to 2 decimal places.)
Number of yards
7.25 yards per kit
3. What was the materials price variance for August if there were no beginning or ending inventories of
materials? (Input all amounts as positive values. Do not round intermediate calculations. Leave
no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance
Material price variance
8,000 F
4. What is the standard direct labor rate per hour? (Omit the "$" sign in your response.)
Standard direct labor rate
6 per DLH
5. What was the labor rate variance for August? The labor efficiency variance? (Input all amounts as
positive values. Do not round intermediate calculations. Leave no cells blank - be certain to
enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable,
"U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your
response.)
Labor rate variance
$
$
3,048 U
600 U
6. What was the variable overhead rate variance for August? The variable overhead efficiency variance?
(Input all amounts as positive values. Do not round intermediate calculations. Leave no cells
blank - be certain to enter "0" wherever required. Indicate the effect of each variance by
selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).
Omit the "$" sign in your response.)
variance
180 F
200 U
7. Complete the standard cost card for one kit shown at the beginning of the problem. (Do not round
intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your
response.)
Direct materials
Direct labor
Standard Quantity
or Hours
7.25 yards
2.25 hours
2.25 hours
Standard Price or Rate

$4 per yard
$
6.00 per hour
$2 per direct labor-hour
Standard Cost
$
29.00
13.50
4.50
$47
rev: 04_27_2012
Explanation:
1.
Total standard cost for units produced during August:

400 kits $47 per kit
Less standard cost of labor and overhead:
Direct labor
Standard cost of materials used during August
$18,800
(5,400)
(1,800)
$11,600
2.
Standard cost of materials used during August (a)

$11,600
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9/14/2014
Number of units produced (b)
400
Standard materials cost per kit (a) (b)
Standard materials cost per kit

Standard materials cost per yard
$ 29.00
$29.00 per kit

$4 per yard
= 7.25 yards per kit
3.
Standard Quantity
Allowed
for Actual Output,
at Standard Price
(SQ SP)
Actual Quantity of
Input, at
Standard Price
Actual Quantity of
Input, at
Actual Price
(AQ SP)
(AQ AP)
2,900 yards**
$4 per yard*
= $11,600
4,000 yards
$4 per yard*
= $16,000
4,000 yards
$2 per yard
= $8,000*
Materials quantity
Materials price
variance = $4,400 U*
variance = $8,000 F
* Given
** 400 kits 7.25 yards per kit = 2,900 yards
4.
The first step in computing the standard direct labor rate is to determine the standard direct labor-hours
allowed for the months production. The standard direct labor-hours can be computed by working with the
variable manufacturing overhead cost figures because they are based on direct labor-hours worked:
Standard variable manufacturing overhead cost for August (a)
Standard manufacturing variable overhead rate per direct labor-hour (b)
$ 1,800
$
2
Standard direct labor-hours for the month (a) (b)
Total standard direct labor cost for the month

Total standard direct labor-hours for the month
=
=
900
$5,400
900 DLHs
$6 per DLH
5.
Before the labor variances can be computed, the actual direct labor cost for the month must be
computed:
Actual cost per kit produced ($47.00 + $.17)
Number of kits produced
Total actual cost of production
Less: Actual cost of materials
Actual cost of manufacturing variable overhead
Actual cost of direct labor
$ 47.17
400
$18,868
$8,000
1,820
9,820
$ 9,048
With this information, the variances can be computed:

for Actual Output,
at Standard Rate
(SH SR)
$5,400*
Actual Hours of Input,

at Standard Rate

at Actual Rate
(AH SR)
(AH AR)
1,000 hours*
$6 per hour
= $6,000
$9,048
8/18
9/14/2014

Labor rate variance
= $600 U
= $3,048 U
Spending variance = $3,648 U
* Given
6.

for Actual Output,
at Standard Rate
(SH SR)
$1,800*

at Standard Rate

at Actual Rate
(AH SR)
(AH AR)
1,000 hours*
$2 per hour*
= $2,000
Variable overhead
Variable overhead
efficiency variance
rate variance
= $200 U
= $180 F
Spending variance = $20 U
$1,820*
* Given
7.
900 hours 400 kits = 2.25 hours per kit.
4.
award:
10 out of
10.00
points
Helix Company produces several products in its factory, including a karate robe. The company uses a
standard cost system to assist in the control of costs. According to the standards that have been set for
the robes, the factory should work 780 direct labor-hours each month and produce 3,900 robes. The
standard costs associated with this level of production are as follows:
Direct materials
Direct labor
(based on direct labor-hours)
Total
$ 88,920
$ 11,700
Per Unit
of Product
$ 22.80
3.00
$ 2,340
0.60
$ 26.40
During April, the factory worked only 750 direct labor-hours and produced 4,000 robes. The following
actual costs were recorded during the month:
Direct materials (12,400 yards)

Direct labor
Total
$ 86,800
$ 12,800
Per Unit
of Product
$ 21.70
3.20
$ 6,000
1.50
$ 26.40
At standard, each robe should require 3.0 yards of material. All of the materials purchased during the
month were used in production.
Required:
1. Compute the materials price and quantity variances for April: (Input all amounts as positive values.
Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each
variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero
variance). Round your intermediate calculations to 2 decimal places and final answers to the
nearest whole dollar. Omit the "$" sign in your response.)
$ 7,440
$ 3,040
F
U
9/18
9/14/2014
2. Compute the labor rate and efficiency variances for April: (Input all amounts as positive values.
variance). Do not round intermediate calculations. Round your final answers to the nearest
dollar amount. Omit the "$" sign in your response.)
Labor rate variance
$ 1,553
$ 750
U
F
3. Compute the variable manufacturing overhead rate and efficiency variances for April: (Input all
amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required.
"None" for no effect (i.e., zero variance). Round your intermediate calculations to 2 decimal
places and final answers to the nearest whole dollar. Omit the "$" sign in your response.)
variance
$ 3,750
$ 150
rev: 04_17_2013_QC_28907
Worksheet



their significance.
Helix Company produces several products in its factory, including a karate robe. The company uses a
standard cost system to assist in the control of costs. According to the standards that have been set for
the robes, the factory should work 780 direct labor-hours each month and produce 3,900 robes. The
standard costs associated with this level of production are as follows:
Direct materials
Direct labor
(based on direct labor-hours)
Total
$ 88,920
$ 11,700
Per Unit
of Product
$ 22.80
3.00
$ 2,340
0.60
$ 26.40
During April, the factory worked only 750 direct labor-hours and produced 4,000 robes. The following
actual costs were recorded during the month:
Direct materials (12,400 yards)

Direct labor
Total
$ 86,800
$ 12,800
$ 6,000
Per Unit
of Product
$ 21.70
3.20
1.50
$ 26.40
At standard, each robe should require 3.0 yards of material. All of the materials purchased during the
month were used in production.
Required:
1. Compute the materials price and quantity variances for April: (Input all amounts as positive values.
variance). Round your intermediate calculations to 2 decimal places and final answers to the
10/18
9/14/2014
nearest whole dollar. Omit the "$" sign in your response.)

$
$
7,440 F
3,040 U
2. Compute the labor rate and efficiency variances for April: (Input all amounts as positive values.
variance). Do not round intermediate calculations. Round your final answers to the nearest
dollar amount. Omit the "$" sign in your response.)
Labor rate variance
$
$
1,550 1%
750 1%
U
F
3. Compute the variable manufacturing overhead rate and efficiency variances for April: (Input all
amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required.
"None" for no effect (i.e., zero variance). Round your intermediate calculations to 2 decimal
places and final answers to the nearest whole dollar. Omit the "$" sign in your response.)
variance
3,750
150
rev: 04_17_2013_QC_28907
Explanation:
1.

for Actual Output,
at Standard Price
(SQ SP)
Actual Quantity
of Input,
at Standard Price
(AQ SP)
Actual Quantity
of Input,
at Actual Price
(AQ AP)
12,000 yards**
$7.60 per yard*
= $91,200
12,400 yards
$7.60 per yard*
= $94,240
$86,800
Materials quantity
variance = $3,040 U
Materials price
variance = $7,440 F

*$22.80 3.0 yards = $7.6 per yard
**4,000 units 3.0 yards per unit = 12,000 yards
2.
Many students will miss parts 2 and 3 because they will try to use product costs as if they were hourly
costs. Pay particular attention to the computation of the standard direct labor time per unit and the
standard direct labor rate per hour.
Standard Hours
Allowed
for Actual Output,
at Standard Rate
(SH SR)
Actual Hours
of Input,
at Standard Rate
Actual Hours
of Input,
at Actual Rate
(AH SR)
(AH AR)
800 hours**
$15.00 per hour*
= $12,000
750 hours
$15.00 per hour*
= $11,250
$12,800

= $750 F
Labor rate variance

= $1,550 U
Spending variance = $800 U

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*780 standard hours 3,900 robes = 0.2 standard hour per robe $3.00 standard cost per robe 0.2
standard hours = $15.00 standard rate per hour
**4,000 robes .2 standard hour per robe = 800 standard hours
3.
Standard Hours
Allowed
for Actual Output,
at Standard Rate
(SH SR)
Actual Hours of
Input, at the
Standard Rate
Actual Hours
of Input,
at Actual Rate
(AH SR)
(AH AR)
800 hours
$3.00 per hour*
= $2,400
750 hours
$3.00 per hour*
= $2,250
$6,000
Variable overhead
efficiency variance
= $150 F
Variable overhead
rate variance
= $3,750 U
Spending variance = $3,600 U

*$.60 standard cost per robe .20 standard hours = $3.00 standard rate per hour
5.
award:
10 out of
10.00
points
You have recently accepted a position with Lorthen Inc. As part of your duties, you review the variances
that are reported for each period and make a presentation to the company's executive committee.
Earlier this morning you received the variances for one of the company's major products for the most
recent period. After reviewing the variances and organizing the data for your presentation, you
accidentally placed the material on top of some papers that were going to the shredder. In the middle of
lunch you suddenly realized your mistake and dashed to the shredding room. There you found the
operator busily feeding your pages through the machine. You managed to pull only part of one page from
the feeding chute, which contains the following information:
Standard Cost Card
Direct materials, 2.30 meters at $17.10 per meter
Direct labor, 1.00 hours at $16.10 per hour
Variable overhead, 1.00 hours at $9.30 per hour
Direct materials
Direct labor
Variable overhead
$ 39.33
$ 16.10
$ 9.30
Total Standard
Quantity or
Cost
Efficiency Variance
$ 589,950
$34,200 U
$ 241,500
$16,100 U
$ 139,500
Ruined by shredder
Price or Rate
Variance
$ 10,585 F
$ 3,200 U
$ 4,000 F
The standard for variable overhead is based on direct labor-hours. All of the materials purchased during
the period were used in production.
At lunch your supervisor said how pleased she was with your work and that she was looking forward
to your presentation that afternoon. You realize that to avoid looking like a bungling fool you must
somehow generate the necessary "backup" data for the variances before the executive committee
meeting starts in one hour.
Required:
1. How many units were produced during the period?
Number of units produced
15,000
2. How many meters of direct materials were purchased and used in production?
Number of meters purchased
36,500
3. What was the actual cost per meter of material? (Round your answer to 2 decimal places. Omit
the "$" sign in your response.)
Actual cost per meter
$ 16.81
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9/14/2014
4. How many actual direct labor-hours were worked during the period?
16,000
5. What was the actual rate per direct labor-hour? (Round your answer to 2 decimal places. Omit the
"$" sign in your response.)
Actual rate per direct labor-hour
$ 16.30
6. How much actual variable manufacturing overhead cost was incurred during the period? (Omit the
Actual variable manufacturing overhead cost
$ 144,800
Worksheet



their significance.
You have recently accepted a position with Lorthen Inc. As part of your duties, you review the variances
that are reported for each period and make a presentation to the company's executive committee.
Earlier this morning you received the variances for one of the company's major products for the most
recent period. After reviewing the variances and organizing the data for your presentation, you
accidentally placed the material on top of some papers that were going to the shredder. In the middle of
lunch you suddenly realized your mistake and dashed to the shredding room. There you found the
operator busily feeding your pages through the machine. You managed to pull only part of one page from
the feeding chute, which contains the following information:
Standard Cost Card
Direct materials, 2.30 meters at $17.10 per meter
Direct labor, 1.00 hours at $16.10 per hour
Variable overhead, 1.00 hours at $9.30 per hour
Direct materials
Direct labor
Variable overhead
$ 39.33
$ 16.10
$ 9.30
Total Standard
Quantity or
Cost
Efficiency Variance
$ 589,950
$34,200 U
$ 241,500
$16,100 U
$ 139,500
Ruined by shredder
Price or Rate
Variance
$ 10,585 F
$ 3,200 U
$ 4,000 F
The standard for variable overhead is based on direct labor-hours. All of the materials purchased during
the period were used in production.
At lunch your supervisor said how pleased she was with your work and that she was looking forward
to your presentation that afternoon. You realize that to avoid looking like a bungling fool you must
somehow generate the necessary "backup" data for the variances before the executive committee
meeting starts in one hour.
Required:
1. How many units were produced during the period?
15,000
2. How many meters of direct materials were purchased and used in production?
Number of meters purchased
36,500
3. What was the actual cost per meter of material? (Round your answer to 2 decimal places. Omit
the "$" sign in your response.)
Actual cost per meter
16.81
4. How many actual direct labor-hours were worked during the period?
13/18
9/14/2014
16,000
5. What was the actual rate per direct labor-hour? (Round your answer to 2 decimal places. Omit the
Actual rate per direct labor-hour
16.30
6. How much actual variable manufacturing overhead cost was incurred during the period? (Omit the
Actual variable manufacturing overhead cost
144,800
Explanation:
1.
The number of units produced can be computed by using the total standard cost applied for the period
for any inputmaterials, labor, or variable overhead. Using the standard cost applied for materials, we
have:
Total standard cost applied
Standard cost per unit
$589,950
$39.33 per unit
= 15,000 units
The same answer can be obtained by using any other cost input.
2 & 3.
Direct materials analysis:

for Actual Output,
at Standard Price
(SQ SP)
Actual Quantity of
Input,
at Standard Price
(AQ SP)
Actual Quantity of
Input,
at Actual Price
(AQ AP)
34,500 meters*
36,500 meters**
36,500 meters
$17.10 per meter
$17.10 per meter
$16.81 per meter***
= $589,950
= $624,150
= $613,565
= $34,200 U
= $10,585 F
*15,000 units 2.30 meters per unit = 34,500 meters
**$624,150 $17.10 per meter = 36,500 meters
***$613,565 36,500 meters = $16.81 per meter
4 & 5.
Direct labor analysis:

for Actual Output,
at Standard Rate
(SH SR)
Actual Hours of
Input,
at Standard Rate
(AH SR)
Actual Hours of
Input,
at Actual Rate
(AH AR)
15,000 hours*
16,000 hours**
16,000 hours
$16.10 per hour
$16.10 per hour
$16.30 per hour***
= $241,500
= $257,600
= $260,800
Labor rate variance
= $16,100 U
= $3,200 U
*15,000 units 1.00 hours per unit = 15,000 hours
**$257,600 $16.10 per hour = 16,000 hours
***$260,800 16,000 hours = $16.30 per hour
6.
Variable overhead analysis:

for Actual Output,
at Standard Rate
Actual Hours of
Input,
at Standard Rate
Actual Hours of
Input,
at Actual Rate
(SH SR)
(AH SR)
(AH AR)
14/18
9/14/2014
15,000 hours
16,000 hours
$9.30 per hour
$9.30 per hour
= $139,500
= $148,800
= $144,800*
Variable overhead
Variable overhead rate
efficiency variance
variance
= $9,300 U
= $4,000 F
*$148,800 $4,000 = $144,800
6.
award:
10 out of
10.00
points
Wymont Company produces a single product that requires a large amount of labor time. Overhead cost
is applied on the basis of standard direct labor-hours. Variable manufacturing overhead should be $7 per
standard direct labor-hour and fixed manufacturing overhead should be $111,000 per year.
The companys product requires 5 feet of direct material that has a standard cost of $3.5 per foot. The
product requires 1.4 hours of direct labor time. The standard labor rate is $15 per hour.
During the year, the company had planned to operate at a denominator activity level of 22,200 direct
labor-hours and to produce 22,500 units of product. Actual activity and costs for the year were as follows:
24,500
Actual direct labor-hours worked
34,000
Actual variable manufacturing overhead cost incurred $ 67,000
Actual fixed manufacturing overhead cost incurred
$ 329,600
Required:
1. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed
components. (Omit the "$" sign in your response.)
Predetermined overhead rate
Variable rate
Fixed rate
$ 12
$7
$5
per DLH
per DLH
per DLH
2. Complete the standard cost card for the companys product; show the details for all manufacturing
costs on your standard cost card. (Round your answers to 2 decimal places. Omit the "$" sign in
your response.)
Direct materials, 5.00
feet at $ 3.50
per foot
Direct labor, 1.40
DLHs at $ 15.00
per DLH
Variable overhead, 1.40
DLHs at $ 7.00
per DLH
Fixed overhead, 1.40
DLHs at $ 5.00
per DLH
$ 17.50
21.00
9.80
7.00
$ 55.30
3a. Compute the standard direct labor-hours allowed for the years production.
Standard direct labor hours
34,300
3b. Complete the following Manufacturing Overhead T-account for the year (Input all amounts as
positive values. Omit the "$" sign in your response):
Manufacturing Overhead
Actual costs
396,600
Applied costs
Overapplied overhead
411,600
15,000
4. Determine the reason for the underapplied or overapplied overhead from (3) above by computing the
variable overhead rate and efficiency variances and the fixed overhead budget and volume variances.
15/18
9/14/2014
(Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever
required. Indicate the effect of each variance by selecting "F" for favorable, "U" for
unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)
Fixed overhead budget variance
Fixed overhead volume variance
Worksheet
$ 171,000
$ 2,100
$ 218,600
$ 60,500
F
F
U
F
Learning Objective: 10A-03 Compute the

Learning Objective: 10A-04 (Appendix
10A) Compute and interpret the fixed
overhead volume and budget variances.
their significance.
Wymont Company produces a single product that requires a large amount of labor time. Overhead cost
is applied on the basis of standard direct labor-hours. Variable manufacturing overhead should be $7 per
standard direct labor-hour and fixed manufacturing overhead should be $111,000 per year.
The companys product requires 5 feet of direct material that has a standard cost of $3.5 per foot. The
product requires 1.4 hours of direct labor time. The standard labor rate is $15 per hour.
During the year, the company had planned to operate at a denominator activity level of 22,200 direct
labor-hours and to produce 22,500 units of product. Actual activity and costs for the year were as follows:
24,500
Actual direct labor-hours worked
34,000
Actual variable manufacturing overhead cost incurred $ 67,000
Actual fixed manufacturing overhead cost incurred
$ 329,600
Required:
1. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed
components. (Omit the "$" sign in your response.)
Predetermined overhead rate
Variable rate
Fixed rate
$
$
$
12 per DLH
7 per DLH
5 per DLH
2. Complete the standard cost card for the companys product; show the details for all manufacturing
costs on your standard cost card. (Round your answers to 2 decimal places. Omit the "$" sign in
your response.)
Direct materials,
5.00 feet at $
3.50 per foot
Direct labor,
1.40 DLHs at $
15.00 per DLH
Variable overhead,
1.40 DLHs at $
7.00 per DLH
Fixed overhead,
1.40 DLHs at $
5.00 per DLH
17.50
21.00
9.80
7.00
55.30
3a. Compute the standard direct labor-hours allowed for the years production.
Standard direct labor hours
34,300
3b. Complete the following Manufacturing Overhead T-account for the year (Input all amounts as
positive values. Omit the "$" sign in your response):
Manufacturing Overhead
Actual costs
396,600
Applied costs
Overapplied overhead
411,600
15,000
16/18
9/14/2014
4. Determine the reason for the underapplied or overapplied overhead from (3) above by computing the
variable overhead rate and efficiency variances and the fixed overhead budget and volume variances.
(Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever
required. Indicate the effect of each variance by selecting "F" for favorable, "U" for
unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)
$
$
$
$
171,000
2,100
218,600
60,500
F
F
U
F
Explanation:
1.
Total:
$ 266,400
= $12 per DLH
22,200 DLHs
Variable:
$ 155,400
= $7 per DLH
22,200 DLHs
Fixed:
$ 111,000
= $5 per DLH
22,200 DLHs
3a.
24,500 units 1.4 DLHs per unit = 34,300 standard DLHs.

3b.
Applied costs (34,300 standard DLHs $12.00 per DLH) = 411,600

4.
Variable overhead variances:

Standard Hours
Allowed
for Actual Output,
at Standard Rate
(SH SR)

at the Standard Rate
(AH SR)

at Actual Rate
(AH AR)
34,300 DLHs
34,000 DLHs
$7 per DLH
$7 per DLH
= $240,100
= $238,000
Variable overhead
Variable overhead
efficiency variance
rate variance
= $2,100 F
= $171,000 F
$67,000
Fixed overhead variances:
Fixed Overhead
Applied to Work in
Process
Budgeted Fixed
Overhead
34,300 DLHs
$5 per DLH
= $171,500
Actual Fixed
Overhead
$111,000
Volume variance
= $60,500 F
$329,600
Budget variance
= $218,600 U
Summary of variances:

2,100 F
171,000 F
60,500 F
218,600 U
17/18
9/14/2014
Overapplied overheadsee part 3
$ 15,000 F
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Assignment Print View

out of 60 points (100%)

Labor rate variance

Assignment Print View

Learning Objective: 10-02 Compute the

Learning Objective: 10-01 Compute the

Learning Objective: 10-03 Compute the

Assignment Print View

2. For labor employed in the production of Fruta:

Assignment Print View

Standard Hours Allowed

Labor efficiency variance

Labor rate variance

Spending variance = $4,291 F

Standard Hours Allowed

Spending variance = $1,874 F

Full credit for this question has been awarded to all

Assignment Print View

Variable manufacturing overhead

Total standard cost per kit

Total standard cost*

*For the month's production.

Actual direct labor-hours

yards per kit

Assignment Print View

Standard Price or Rate

Total standard cost per kit

Learning Objective: 10-02 Compute the

Learning Objective: 10-01 Compute the

Learning Objective: 10-03 Compute the

Total standard cost per kit

Total standard cost*

*For the month's production.

Assignment Print View

7.25 yards per kit

Standard Price or Rate

Total standard cost per kit

Total standard cost for units produced during August:

Standard cost of materials used during August (a)

Assignment Print View

Number of units produced (b)

Standard materials cost per kit (a) (b)

Standard materials cost per kit

$29.00 per kit

= 7.25 yards per kit

Standard direct labor-hours for the month (a) (b)

Total standard direct labor cost for the month

With this information, the variances can be computed:

Actual Hours of Input,

Actual Hours of Input,

Assignment Print View

Labor efficiency variance

Standard Hours Allowed

Actual Hours of Input,

Actual Hours of Input,

900 hours 400 kits = 2.25 hours per kit.

Direct materials (12,400 yards)

Variable manufacturing overhead

Assignment Print View

Learning Objective: 10-02 Compute the

Learning Objective: 10-01 Compute the

Learning Objective: 10-03 Compute the