1. CEX.09.01. ALGO Algorithmic) eBook Calculating Standard Quantities for Actual Production Guillermo's Oil and Lube Company is a service company that offers oil changes and lubrication for automobiles and light trucks. On average, Guillermo has found that a typical oil change takes 21 minutes and 6.7 quarts of oil are used. In June, Guillermo's Oil and Lube had 960 oil changes. Required: 1. Calculate the number of quarts of oil that should have been used (SQ) for 960 oil changes. quarts 2. Calculate the hours of direct labor that should have been used (SH) for 960 oil changes. direct labor hours 3. What if there had been 950 oil changes in June? Would the standard quantities of oil (in quarts) and of direct labor hours be higher or lower than the amounts calculated in Requirements 1 and 2? What would the new standard quantities be? Round your answers to two decimal places. SQ quarts SH direct labor hours 2. CEX.09.02.ALGO (Algorithmic) eBook Calculating the Direct Materials Price Variance and the Direct Materials Usage Variance Guillermo's Oil and Lube Company is a service company that offers oil changes and lubrication for automobiles and light trucks. On average, Guillermo has found that a typical oil change takes 20 minutes and 6.4 quarts of oil are used. In June, Guillermo's Oil and Lube had oil changes. Guillermo's Oil and Lube Company provided the following information for the production of oil changes during the month of June: Actual number of oil changes performed: 900 Actual number of quarts of oil used: 6,620 quarts Actual price paid per quart of oil: $5.20 Standard price per quart of oil: $5.15 Required: 1. Calculate the direct materials price variance (MPV) and the direct materials usage variance (MUV) for June using the formula approach. If required, round your answers to the nearest cent. MPV $ MUV $ 2. Calculate the total direct materials variance for oil for June. If required, round your answer to the nearest cent. $ 3. What if the actual number of quarts of oil purchased in June had been 6530 quarts, and the materials price variance was calculated at the time of purchase? If required, round your answers to the nearest cent. What would be the materials price variance (MPV)? $ What would be the materials usage variance (MUV)? 3. CEX.09.03.ALGO (Algorithmic) eBook Calculating the Direct Labor Rate Variance and the Direct Labor Efficiency Variance Guillermo's Oil and Lube Company is a service company that offers oil changes and lubrication for automobiles and light trucks. On average, Guillermo has found that a typical oil change takes 24 minutes and 6.2 quarts of oil are used. In June, Guillermo's Oil and Lube had 980 oil changes. Guillermo's Oil and Lube Company provided the following information for the production of oil changes during the month of June: Actual number of oil changes performed: 980 Actual number of direct labor hours worked: 388 hours Actual rate paid per direct labor hour: $15.50 Standard rate per direct labor hour: $15.00 Required: 1. Calculate the direct labor rate variance (LRV) and the direct labor efficiency variance (LEV) for June using the formula approach. Direct labor rate variance (LRV) $ Direct labor efficiency variance (LEV) $ 2. the direc rate variance (LRV) and t rect efficiency variance June Direct labor rate variance (LRV) $ Direct labor efficiency variance (LEV) $ 3. Calculate the total direct labor variance for oil changes for June. $ 4. What if the actual wage rate paid in June was $14.50? What impact would that have had on the direct labor rate variance (LRV)? On the direct labor efficiency variance (LEV)? Indicate what the new variances would be below. If required, round your answers to the nearest cent. Direct labor rate variance (LRV): $ Direct labor efficiency variance (LEV): 4. CEX.09.05.ALGO Algorithmic) eBook Closing the Balances in The Variance Accounts at the End of the Year Yohan Company has the following balances in its direct materials and direct labor variance accounts at year-end: Debit Credit $14,050 $1,200 Direct Materials Price Variance Direct Materials Usage Variance Direct Labor Rate Variance Direct Labor Efficiency Variance 840 $12,760 Unadjusted Cost of Goods Sold equals $1,570,000, unadjusted Work in Process equals $266,000, and unadjusted Finished Goods equals $260,000. Required: 1. Assume that the ending balances in the variance accounts are immaterial and prepare the journal entries to close them to cost of Goods Sold. Note: Close the variances with a debit balance first. If an amount box does not require an entry, leave it blank or enter "0". Close variances with debit balance Close variances with credit balance What is the adjusted balance in Cost of Goods Sold after closing out the variances? $ 2. What if any ending balance in a variance account that exceeds $8,000 is considered material? (a) Close the immaterial variance accounts to cost of Goods Sold. (b) Prorate the largest of the labor variances among Cost of Goods Sold, Work in Process, and Finished Goods on the basis of prime costs in these accounts. (c) Prorate the largest of the material variances among cost of Goods Sold, Work In Process, and Finished Goods on the basis of prime costs in these accounts. The prime cost in Cost of Goods Sold is $1,050,000, the prime cost in Work in Process is $165,400, and the prime cost in Finished Goods is $129,000. If an amount box does not require an entry, leave it blank or enter "0". Note: Round all interim calculations to three decimal places, and round your final answers to the nearest dollar. Adjust credit entry for rounding to ensure debits equal credits in journal entry. (b) (c) What are the adjusted balances in Work in Process, Finished Goods, and cost of Goods Sold after closing out all variances? Adjusted balance Work in Process $ Finished Goods $ Cost of Goods Sold $ 5. CEX.09.06.ALGO (Algorithmic) Calculating the Total Overhead Variance Standish Company manufactures consumer products and provided the following information for the month of February: 131,300 Units produced Standard direct labor hours per unit 0.2 Standard variable overhead rate (per direct labor hour) $3.40 Actual variable overhead costs $88,650 Actual hours worked 26,550 Required: 1. Calculate the total variable overhead variance. 2. What if actual production had been 128,600 units? How would that affect the total variable overhead variance? Indicate what the new variance would be below. 6. CEX.09.07.ALGO (Algorithmic) eBook Calculating the Variable Overhead Spending and Efficiency Variances Standish Company manufactures consumer products and provided the following information for the month of February: Units produced 131,800 Standard direct labor hours per unit 0.2 Standard variable overhead rate (per direct labor hour) $3.40 Actual variable overhead costs $88,700 Actual hours worked 26,450 Required: 1. Calculate the variable overhead spending variance using the formula approach. (If you compute the actual variable overhead rate, carry your computations out to five significant digits and round the variance to the nearest dollar) $ 2. Calculate the variable overhead efficiency variance using the formula approach. $ 3. What if 26,100 direct labor hours were actually worked in February? What impact would that have had on the variable overhead spending variance? What impact would that have had on the variable overhead efficiency variance? 7. CEX.09.08.ALGO (Algorithmic) EE eBook Calculating the Fixed Overhead Spending and Volume Variances Standish Company manufactures consumer products and provided the following information for the month of February: Units produced 131,800 Standard direct labor hours per unit 0.2 Standard fixed overhead rate (per direct labor hour) $2.30 Budgeted fixed overhead $64,200 Actual fixed overhead costs $68,900 Actual hours worked 26,850 Required: 1. Calculate the fixed overhead spending variance using the formula approach. $ 2. Calculate the volume variance using the formula approach. $ 3. What if 127,000 units had actually been produced in February? What impact would that have had? Indicate what the new variances would be below. Fixed Overhead Spending Variance Volume Variance 8. EX.09.12.ALGO (Algorithmic) eBook Setting Standards, Ethical Behavior Quincy Farms is a producer of items made from farm products that are distributed to supermarkets. For many years, Quincy's products have had strong regional sales on the basis of brand recognition. However, other companies have been marketing similar products in the area, and price competition has become increasingly important. Doug Gilbert, the company's controller, is planning to implement a standard costing system for Quincy and has gathered considerable information from his coworkers on production and direct materials requirements for Quincy's products. Doug believes that the use of standard costing will allow Quincy to improve cost control and make better operating decisions. Quincy's most popular product is strawberry jam. The jam is produced in 10-gallon batches, and each batch requires five quarts of good strawberries. The fresh strawberries are sorted by hand before entering the production process. Because of imperfections in the strawberries and spoilage, one quart of strawberries is discarded for every four quarts of acceptable berries. Six minutes is the standard direct labor time required for sorting strawberries in order to obtain one quart of strawberries. The acceptable strawberries are then processed with the other ingredients: processing requires 15 minutes of direct labor time per batch. After processing, the jam is packaged in quart containers. Doug has gathered the following information from Joe Adams, Quincy's cost accountant, relative to processing the strawberry jam. a. Quincy purchases strawberries at a cost of $0.70 per quart. All other ingredients cost a total of $0.48 per gallon. b. Direct labor is paid at the rate of $8.90 per hour. C. The total cost of direct material and direct labor required to package the jam is $0.44 per quart. Joe has a friend who owns a strawberry farm that has been losing money in recent years. Because of good crops, there has been an oversupply of strawberries, and prices have dropped to $0.50 per quart. Joe has arranged for Quincy to purchase strawberries from his friend's farm in hopes that the $0.70 per quart will put his friend's farm in the black. Required: 1. Which of Doug's coworkers would probably be the least helpful to Doug in setting standards? Which of the listed factors would be the least relevant to Doug in establishing the standards for direct materials and direct labor? 2. Develop the standard cost sheet for the prime costs of a 10-gallon batch of strawberry jam. Do not round intermediate calculations. If required, round your answers to the nearest cent. Quincy Farms Standard Cost Sheet Strawberry Jam - 10-Gallon Batch Strawberries Other ingredients Sorting labor Processing labor Packaging Total standard cost $ 3. Citing the specific standards of the IMA Statement of Ethical Professional Practice described in Chapter 1, explain why Joe's behavior regarding the cost information provided to Doug is unethical. (CMA adapted) 9. EX.09.14.ALGO (Algorithmic) eBook Direct Materials and Direct Labor Variances Zoller Company produces a dark chocolate candy bar. Recently, the company adopted the following standards for one bar of the candy: Direct materials (6.20 oz. @ $0.20) $1.24 Direct labor (0.08 hr. @ $18.00) 1.44 Standard prime cost $2.68 During the first week of operation, the company experienced the following actual results: a. Bars produced: 144,000. b. Ounces of direct materials purchased: 893,100 ounces at $0.21 per ounce. c. There are no beginning or ending inventories of direct materials. d. Direct labor: 11,380 hours at $17.30. Required: Instructions for parts 1 and 2: If a variance is zero, enter "0" and select "Not applicable" from the drop down box. 1. Compute price and usage variances for direct materials. Materials Price Variance $ Materials Usage Variance $ 2. Compute the rate variance and the efficiency variance for direct labor. Labor Rate Variance $ Labor Efficiency Variance $ 3. Prepare the journal entries associated with direct materials and direct labor. If an amount box does not require an entry, leave it blank or enter "O". Record purchase of materials Record usage of materials Record labor variances