Materials and labor variance analyses}

Similar to Self-Study Problem 1 The standard cost summary for the most popular product of Excelsior Products Company is shown as follows, together with production and cost data for the period.

One gallon each of liquid lead and varnish are added at the start of processing. The balance of the materials are added when the process is two-thirds complete. Labor and overhead are added evenly throughout the process.
{Required:}
1. Calculate equivalent production. (Be sure to refer to the standard cost summary to help determine the percent of materials in ending work in process.)
2. Calculate materials and labor variances and indicate whether they are favorable or unfavorable, using the diagram format shown in Figure 8-4.
3. Determine the cost of materials and labor in the work in process account at the end of the month.
4. Prove that all materials and labor costs have been accounted for. (Hint: Don't forget the net variances in reconciling the costs accounted for with the costs to be accounted for.)

Transcribed Image Text:

Materials: Standard Cost Summary 2 gallons of liquid lead @ $2.00/gal. 2 gallons of varnish @ $3.00/gal.. Labor: 1 hour $12.00/hr........ @ $4.00 6.00 $10.00 12.00 Factory overhead: $1.00 per direct labor hour 1.00 Total standard unit cost. $23.00 Production and Cost Summary Units completed during the month 9,000 Ending units in process (one-fourth completed) 2,000 Gallons of liquid lead used........ 21,000 20,000 Gallons of varnish used..... Direct labor hours worked Cost of liquid lead used Cost of varnish used... Cost of direct labor 10,000 $ 41,160 $ 60,000 $117,000