7 Springsteen Company manufactures guitars. The company uses a standard, job-order cost-accounting system in two production departments. In the Construction Department, the wooden guitars are built by highly skilled craftsmen and coated with several layers of lacquer. Then the units are transferred to the Finishing Department, where the bridge of the guitar is attached and the strings are installed. The guitars also are tuned and inspected in the Finishing Department. The diagram below depicts the production process. Part 3 of 3 1.66 points Construction Department (Basic guitar built from veneered wood Finishing Department (Bridge and strings attached; guitar tuned and inspected) Each finished guitar contains seven pounds of veneered wood. In addition, one pound of wood is typically wasted in the production process. The veneered wood used in the guitars has a standard price of $12 per pound. The other parts needed to complete each guitar, such as the bridge and strings, cost $15 per guitar. The labor standards for Springsteen's two production departments are as follows: Construction Department: 6 hours of direct labor at $22 per hour Finishing Department: 2 hours of direct labor at $15 per hour The following pertains to the month of July. 1. There were no beginning or ending work-in-process inventories in either production department. 2. There was no beginning finished-goods inventory. 3. Actual production was 610 guitars, and 410 guitars were sold on account for $455 each. 4. The company purchased 7,100 pounds of veneered wood at a price of $12.50 per pound. 5. Actual usage of veneered wood was 5,600 pounds of the wood purchased during July. 6. Enough parts (bridges and strings) to finish 710 guitars were purchased at a cost of $9,110. 7. The Construction Department used 3,500 direct-labor hours. The total direct-labor cost in the Construction Department was $73,500. 8. The Finishing Department used 1.300 direct-labor hours. The total direct-labor cost in that department was $20.800. 9. There were no direct-material variances in the Finishing Department. 3. Complete the following cost variance report for July. Springsteen Company investigates all variances greater than $5,000 or 5%. (Use Exhibit 105.) (Indicate the effect of each varlance by selecting "Favorable" or "Unfavorable". Select "None" and enter "O" for no effect (1.e., zero varlence). Round "Percentage of Standard Cost" to 2 decimal places.) SPRINGSTEEN COMPANY Cost Variance Report For the Month of July Construction Department Variance Percentage of Investigation Standard Cost Required Finishing Department Amount Amount Percentage of Standard Cost Variance Investigation Required Direct material: Standard cost, given actual output Direct-material price variance Direct-material quantity variance Direct-material purchase price variance Direct labor Standard cost, given actual output Direct-labor rate variance Direct-labor efficiency variance 2,800 Unfavorable Unfavorable Unfavorable % No % Yes % Yes Favorable Favorable Favorable % No % No % No Favorable Favorable % No % No Unfavorable Unfavorable %6 Yes 9 No National Bank Exhibit 10-5 Cost Variance Report for April: FHNB, All Branches Forest Home Percentage of Amount Standard Cost Investigate?* Teller operations Standard cost allowed (for 15,800 actual transactions) $31,600 Direct-labor rate variance $ 1,060 U 3.4% Yes Direct-labor efficiency variance $ 3,400 F 10.8% Yes Consumer-loan processing Standard cost allowed (for 190 actual loan applications) $ 7,600 Direct-labor rate variance $ 680 U 8.9% No Direct-labor efficiency variance $ 840 U 11.1% Yes "Investigate variances greater than $1,000 or 10% of standard cost