Business Specialty, Inc., manufactures two staplers, small and regular. The standard quantities of labor and materials per unit for the year are

The standard price paid per pound of direct materials is $1.60. The standard rate for labor is $8. Overhead is applied on the basis of direct labor hours. A plantwide rate is used. Bud¬ geted overhead for the year is given below.

The company expects to work 12,000 direct labor hours during the year; standard overhead rates are computed using this activity level. For every small stapler produced, the company produces two regular staplers.
Actual operating data for the year are

a. Units produced: small staplers, 35,000; regular staplers, 70,000.

b. Direct materials purchased and used: 56,000 pounds at $1.55—13,000 for the small sta¬
pler and 43,000 for the regular stapler. There were no beginning or ending raw mate¬
rials inventories.

c. Direct labor: 14,800 hours—3,600 hours for the small stapler; 11,200 hours for the reg¬
ular. Total cost of labor: $114,700.

d. Variable overhead: $607,500.

e. Fixed overhead: $350,000.
Required:
1. Prepare a standard cost sheet showing the unit cost for each product.
2. Compute the materials price and usage variances for each product. Prepare journal en¬
tries to record materials activity.
3. Compute the labor rate and efficiency variances. Prepare journal entries to record labor activity.
4. Compute the variances for fixed and variable overhead. Prepare journal entries to record overhead activity. All variances are closed to Cost of Goods Sold.
5. Assume that you know only the total direct materials used for both products and the total direct labor hours used for both products. Can you compute the total materials and labor usage variances? Explain.

Transcribed Image Text:

Small Regular Direct materials (oz.) 6.0 10.00 Direct labor (hrs.) 0.1 0.15