ACG 2071 Lecture Notes - Lecture 20: Fast Food Restaurant, Washing Machine, Cost Accounting
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The standard cost card for the single product manufactured by Cutter, Inc., is given below:
| Inputs | (1) Standard Quantity or Hours | (2) Standard Price or Rate | Standard Cost (1) Ã (2) | ||||
| Direct materials | 4.2 yards | $ | 5.00 | per yard | $ | 21.00 | |
| Direct labor | 0.8 hours | $ | 15.00 | per hour | 12.00 | ||
| Variable overhead | 0.8 hours | $ | 1.50 | per hour | 1.20 | ||
| Fixed overhead | 0.8 hours | $ | 5.00 | per hour | 4.00 | ||
| Total standard cost per unit | $ | 38.20 | |||||
Manufacturing overhead is applied to production on the basis of standard direct labor-hours. During the year, the company worked 8,760 hours and manufactured 10,700 units of product. Selected data relating to the companyâs fixed manufacturing overhead cost for the year are shown below:
| Actual Fixed Overhead | Budgeted Fixed Overhead | Fixed Overhead Applied to Work in Process | |||||
| $42,000 | ? | ? hours à $? per hour = $? | |||||
| Budget variance, $? | Volume variance, $1,800 F | ||||||
Required:
1. What were the standard hours allowed for the yearâs production?
2. What was the amount of budgeted fixed overhead cost for the year?
3. What was the fixed overhead budget variance for the year? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
4. What denominator activity level did the company use in setting the predetermined overhead rate for the year?
1) Perfect Posies,Inc. makes glass vases from a liquid silicate. The CEO, DahliaBloom, wants to switch to a standard costing system, She made twoscheduled visits to the factory last month to gather productiondata, which she then used to develop the following productionstandards:
Directmaterials 0.8lbs, of silicate at $0.30 per lb. for each vase
Directlabor 0.3 DLH at $13 per DLH for each vase
Manufacturing overhead
- $9,000 VMOH permonth
- $4,500 FMOH permonth
- Allocated using directlabor hours
- Based on expectedproduction of 6,000 vases per month
The firm had the following actual production data for March:
Units actually produced | 6,900 vases |
Materials purchased and used | 7,590 lbs. of silicate at a cost of $3,036 |
Direct labor used: | 1,380 DLH at a cost of $13,800 |
Variable overhead costs incurred: | $10,200 |
Fixed overhead costs incurred: | $2,830 |
a) DM price variance for March=(AP-SP)AQ
= ($2.5 â $0.30)7,590 = $16,698 U
What might have caused this variance? Rise in price
b) DM usage variance for March =(AQ-SQ)SP
= (7,590-4,800) $0.30 = $837U
What might have caused this variance? Use of low qualitymaterials
c) DL rate variance for March =(AR-SR)AH
= ($10-$13)1,380 = $4,140 F
What might have caused this variance? Hire inexperiencedworkers.
d) DL efficiency variance for March =(AH-SH)SR
= (1,380-1,800)$13 = $5,460 F
What might have caused this variance? Training of workforce
e) Standard allocation rate for VMOH =Actual variable overhead-(SVOR x AH) = $10,200 â (
f) VMOH spending variance forMarch =
What might have caused this variance?
g) VMOH efficiency variance for March =
What might have caused this variance?
h) Standard allocation rate for FMOH =
i) FMOH spending variance forMarch =
What might have caused this variance?
j) FMOH volume variance for March=
What might have caused this variance?
K) Based on the available information,Dahlia Bloom has asked you to write her a memo discussing:
i) Possible causes for the trendsthat you observe in these variances
ii) How/why the production department may haveâgamedâ the standard-setting process
iii) Steps the firm can take to develop better standards in thefuturE â
I JUST NEED HELP WITH QUESTION K. THANK YOU
Wallis Company manufactures only one product and uses a standard cost system. The company uses a predetermined plantwide overhead rate that relies on direct labor-hours as the allocation base. All of the company's manufacturing overhead costs are fixedâit does not incur any variable manufacturing overhead costs. The predetermined overhead rate is based on a cost formula that estimated $2,899,000 of fixed manufacturing overhead for an estimated allocation base of 289,900 direct labor-hours. Wallis does not maintain any beginning or ending work in process inventory.
The companyâs beginning balance sheet is as follows:
| Wallis Company | ||
| Balance Sheet | ||
| 1/1/XX | ||
| (dollars in thousands) | ||
| Assets | ||
| Cash | $ | 850 |
| Raw materials inventory | 300 | |
| Finished goods inventory | 420 | |
| Property, plant, and equipment, net | 10,000 | |
| Total assets | $ | 11,570 |
| Liabilities and Equity | ||
| Retained earnings | $ | 11,570 |
| Total liabilities and equity | $ | 11,570 |
The companyâs standard cost card for its only product is as follows:
| Inputs | (1) Standard Quantity or Hours | (2) Standard Price or Rate | Standard Cost (1) Ã (2) | ||||
| Direct materials | 2 pounds | $ | 33.00 | per pound | $ | 66.00 | |
| Direct labor | 3.00 hours | $ | 15.00 | per hour | 45.00 | ||
| Fixed manufacturing overhead | 3.00 hours | $ | 10.00 | per hour | 30.00 | ||
| Total standard cost per unit | $ | 141.00 | |||||
During the year Wallis completed the following transactions:
Purchased (with cash) 237,500 pounds of raw material at a price of $31.00 per pound.
Added 218,750 pounds of raw material to work in process to produce 96,500 units.
Assigned direct labor costs to work in process. The direct laborers (who were paid in cash) worked 248,000 hours at an average cost of $16.00 per hour to manufacture 96,500 units.
Applied fixed overhead to work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed to manufacture 96,500 units. Actual fixed overhead costs for the year were $2,747,500. Of this total, $1,355,000 related to items such as insurance, utilities, and salaried indirect laborers that were all paid in cash and $1,392,500 related to depreciation of equipment.
Transferred 96,500 units from work in process to finished goods.
Sold (for cash) 93,500 units to customers at a price of $170 per unit.
Transferred the standard cost associated with the 93,500 units sold from finished goods to cost of goods sold.
Paid $2,127,500 of selling and administrative expenses.
Closed all standard cost variances to cost of goods sold.
Required:
1. Compute all direct materials, direct labor, and fixed overhead variances for the year.
2. Record transactions a through i for Wallis Company.
3. Compute the ending balances for Wallis Companyâs balance sheet.
4. Prepare Wallis Companyâs income statement for the year.
Compute all direct materials, direct labor, and fixed overhead variances for the year. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
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Record transactions a through i for Wallis Company.
Compute the ending balances for Wallis Companyâs balance sheet.
(Unfavorable variances and decreases in balance sheet accounts should be entered with a minus sign. Enter your dollars in thousands.)
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Prepare Wallis Companyâs income statement for the year. (Enter your dollars in thousands. Round your answers to the nearest whole dollar amount.)
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