Koolkare Company manufactures two types of ice makers, small and regular. The standard quantities of labor and materials per unit for 2001 are:

Small Regular Direct materials (oz) Om2: 0.20 Direct labor (hr) 0.20 0.30 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. Budgeted overhead for the year follows:

Budgeted fixed overhead $720,000 Budgeted variable overhead 960,000 The company expects to work 24,000 direct labor hours in 2001; standard over- head rates are computed using this activity level. For every small ice maker pro- duced, the company produces two regular ice makers.

Actual operating data for 2001 are:

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

b. Direct materials purchased and used: 112,000 pounds at $1.55—26,000 for the small ice maker and 86,000 for the regular ice maker; no beginning or ending raw materials inventories

c. Direct labor: 29,600 hours—7,200 hours for the small ice maker and 22,400 hours for the regular; total cost of labor, $229,400

d. Variable overhead: $1,215,000

e. Fixed overhead: $700,000 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 entries to record materials activity.

3. Compute the labor rate and efficiency variances. Prepare journal entries to record labor activity.

4. Compute the variances for variable and fixed 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 usage and labor efficiency variances? Explain.