Sarah Manufacturing Co. is a producer of men's slacks in a variety of styles, colors, and price
Question:
Sarah Manufacturing Co. is a producer of men's slacks in a variety of styles, colors, and price ranges, which uses a standard direct costing system for internal reporting. During October Job \#423 was completed which consisted of 20 dozen slacks in Style X. Job \#423 utilized 760 sq. yds. of cloth which had been purchased at a cost of \(\$ 5\) per yard. A total of 226 direct labor hours were required, at a wage rate of \(\$ 8.50\) per hour. Total factory overhead incurred during October was \(\$ 118,600\). The following standards have been established for one pair of slacks in Style X:
Sarah carries raw materials inventories at actual cost. The selling price of one pair of slacks of Style \(X\) is \(\$ 40\). Distribution costs for a pair of slacks average \(\$ 0.50\) each; all other selling costs apply to all product lines and are considered fixed. Fixed manufacturing costs for the month were \(\$ 80,000\) and budgeted activity was 9,600 direct labor hours.
{Required:}
(a) Determine the standard unit cost of one pair of Style \(\mathrm{X}\) slacks for internal reporting purposes.
(b) Compute all materials and labor variances.
(c) Prepare in good form a report showing the contribution to fixed costs and profits by Job \#423.
(d) Comment on the effect of factory overhead costs on your answer to (c).
Step by Step Answer:
Cost Accounting For Managerial Planning Decision Making And Control
ISBN: 9781516551705
6th Edition
Authors: Woody Liao, Andrew Schiff, Stacy Kline