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

Required:
1. Prepare a standard cost sheet showing the unit cost for each product.
2. Compute the direct materials price and usage variances for each product. Prepare journal entries to record direct materials activity.
3. Compute the direct labor rate and efficiency variances for each product. Prepare journal entries to record direct 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 direct materials and direct labor usage variances? Explain.LO1

Transcribed Image Text:

Small Regular Direct materials (oz.) Direct labor (hrs.) 6.0 10.00 0.1 0.15 The standard price paid per pound of direct materials is $1.60. The standard rate for labor is $8.00. Overhead is applied on the basis of direct labor hours. A plantwide rate is used. Budgeted overhead for the year is as follows: Budgeted fixed overhead Budgeted variable overhead $360,000 480,000 The company expects to work 12,000 direct labor hours during the year; standard over- head rates are computed using this activity level. For every small stapler produced, the company produces two regular staplers.