The Emerson Division of Golding Company produces small kitchen appliances. The com pany uses a standard cost

Question:

The Emerson Division of Golding Company produces small kitchen appliances. The com¬

pany uses a standard cost system for production costing and control. The standard cost sheet for its most popular product, a toaster, is given below.

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During the year, Emerson experienced the following activity relative to the production of toasters:

a. Production of toasters totaled 50,000 units.

b. A total of 130,000 pounds of raw materials was purchased at $3.70 per pound.

c. There were 10,000 pounds of raw materials in beginning inventory (carried at $4 per pound). There was no ending inventory.

d. The company used 36,500 direct labor hours at a total cost of $392,375.

e. Actual fixed overhead totaled $95,000.

f. Actual variable overhead totaled $210,000.
Emerson produces all of its toasters in a single plant. Normal activity is 45,000 units per year. Standard overhead rates are computed based on normal activity measured in standard direct labor hours.
Required:
1. Compute the materials price and usage variances.
2. Compute the labor rate and efficiency variances.
3. Compute overhead variances using a two-way analysis.
4. Compute overhead variances using a four-way analysis.
5. Assume that the purchasing agent for the toaster plant purchased a lower-quality raw material from a new supplier. Would you recommend that the company con¬
tinue to use this cheaper raw material? If so, what standards would likely need re¬
vision to reflect this decision? Assume that the end product's quality is not signifi¬
cantly affected.
6. Prepare all possible journal entries (assuming a four-way analysis of ov erhead vari¬
ances).