Allocation of variances Malibu Manufacturing Corporation uses a standard cost system that records raw materials at actual cost, records materials price variances at the time that raw materials are issued to Work in Process, and prorates all variances at year-end. Variances associated with direct materials are


prorated based on the direct materials balances in the appropriate accounts, and variances associated with direct labor are prorated based on the direct labor balances in the appropriate accounts. The following information is available for Malibu for the year ended December 31:

There were no beginning inventories and no ending work in process inventory.
{Required:}
Calculate the following.
1. Amount of materials price variance to be prorated to finished goods inventory at December 31. (Hint: You must first determine the ratio of direct materials cost in the ending finished goods inventory.)
2. Total amount of direct materials cost in the finished goods inventory at December 31, after all variances have been prorated.
3. Total amount of direct labor cost in the finished goods inventory at December 31, after all variances have been prorated.
4. Total cost of goods sold for the year ended December 31, after all variances have been prorated.

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Raw materials inventory at December 31 Finished goods Inventory at December 31: Direct materials Direct labor $ 65,000 87,000 130,500 Applied factory overhead 104,400 Cost of goods sold for the year ended December 31: Direct materials. 348,000 Direct labor 739,500 Applied factory overhead 591,600 Materials quantity variance (favorable) 15,000 Materials price variance (unfavorable). 10,000 Labor efficiency variance (favorable) 5,000 Labor rate variance (unfavorable) 20,000 Factory overhead applied 696,000