21.

value: 5.78 points

Problem 8A-8 Comprehensive Standard Cost Variances [LO4, LO5, LO6, LO7]

It certainly is nice to see that small variance on the income statement after all the trouble weve had lately in controlling manufacturing costs, said Linda White, vice president of Molina Company. The $32,400 overall manufacturing variance reported last period is well below the 4% limit we have set for variances. We need to congratulate everybody on a job well done.

The company produces and sells a single product. The standard cost card for the product follows:

Standard Cost CardPer Unit
Direct materials, 4.00 yards at $3.40 per yard	$	13.60
Direct labor, 2.5 direct labor-hours at $12.00 per direct labor-hour		30.00
Variable overhead, 2.5 direct labor-hours at $1.60 per direct labor-hour		4.00
Fixed overhead, 2.5 direct-labor hours at $6.00 per direct labor-hour		15.00
Standard cost per unit	$	62.60

The following additional information is available for the year just completed:

a.	The company manufactured 25,000 units of product during the year.

b.	A total of 97,000 yards of material was purchased during the year at a cost of $3.60 per yard. All of this material was used to manufacture the 25,000 units. There were no beginning or ending inventories for the year.

c.	The company worked 66,000 direct labor-hours during the year at a cost of $11.80 per hour.

d.	Overhead cost is applied to products on the basis of standard direct labor-hours. Data relating to manufacturing overhead costs follow:

Denominator activity level (direct labor-hours)		60,000
Budgeted fixed overhead costs	$	360,000
Actual fixed overhead costs	$	357,200
Actual variable overhead costs	$	112,200

Required:
1.	Compute the direct materials quantity and price variances for the year. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Direct materials quantity variance	$	(Click to select)FUNone
Direct materials price variance	$	(Click to select)FUNone

2.

Compute the direct labor efficiency and rate variances for the year. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Direct labor efficiency variance	$	(Click to select)FUNone
Direct labor rate variance	$	(Click to select)FUNone

3.	For manufacturing overhead, compute the following:

a.

The variable overhead efficiency and rate variances for the year. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Efficiency variance	$	(Click to select)FUNone
Rate variance	$	(Click to select)FUNone

b.

The fixed overhead budget and volume variances for the year. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Volume variance	$	(Click to select)FUNone
Budget variance	$	(Click to select)FUNone

4.

a.	What is the total of variance that you have computed? (Input all amounts as positive values. Leave no cell blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Total variance	$	(Click to select)NoneFU

b.

Compare the net amount with the $32,400 mentioned by the vice president. Do you agree that everyone should be congratulated for a job well done?

	Yes
	No