You are employed by Olster Company, which manufactures products for the health and nutrition market. As a rising executive in the company, you are scheduled to make a presentation in a few hours to your superior. This presentation relates to last week?s production of Maxitol, Olster?s popular health tonic. Unfortunately, while you were near the pool in your company?s fitness centre, studying ledger sheets and variance summaries, somebody bumped into you and you dropped the papers into the water. In desperation, you fished the papers out of the pool, but you have discovered that only the following fragments are legible:

You remember that the accounts payable are for purchases of materials A and B. You also remember that only 10 direct labour workers are involved in the production of Maxitol and that each worked 40 hours last week. The wages payable are for wages earned by these workers.

You realize that, to be ready for your presentation, you must quickly reconstruct all data relating to Maxitol. As a start, you have called purchasing and found that 4,000 litres of material A and 400 kilograms of material B were purchased last week.

Required:

1. How many batches of Maxitol were produced last week? (This is a key figure; be sure it is right before going on.)

2. For material A:

a. What was the cost of material A purchased last week?

b. How many litres were used in production last week?

c. What was the quantity variance?

d. Prepare journal entries to record all activity relating to material A for last week.

Maxitol?General Ledger Accounts

3. For material B:

a. What is the standard cost per kilogram for material B?

b. How many kilograms of material B were used in production last week? How many kilograms should have been used at standard?

c. What is the standard quantity of material B per batch?

d. What was the price variance for material B last week?

e. Prepare journal entries to record all activity relating to material B for last week.

4. For direct labour:

a. What is the standard rate per direct labour-hour?

b. What are the standard hours per batch?

c. What were the standard hours allowed for last week?s production?

d. What was the labour efficiency variance for last week?

e. Prepare a journal entry to record all activity relating to direct labour for last week.

5. Complete the standard cost card previously shown for one batch of Maxitol.

Transcribed Image Text:

Maxitol-Standard Cost Card Standard Price or Rate $2 per litre per kilogram Standard Quantity Standard Cost or Hours 24 litres Material A Material B Direct labour per hour Standard cost per batch $99.50 Raw Materlals-A Bal. March 1 Bal. March 7 2,000 Materlal A-Price Varlance 300 Raw MaterlalsB Bal. March 1 70 2,500 Bal. March 7 1,400 Materlal B-Quantity Varlance 100 Work in Process Bal. March 1 Material A 5,760 Bal. March 7