Accounting Help

Problem #2

Lucas Corporation manufactures a single product. The standard cost per unit of product is as follows.

Direct materials 2 pounds of plastic at $5 per pound $ 10

Direct labor 2 hours at $12 per hour 24

Variable manufacturing overhead 8

Fixed manufacturing overhead 6

Total standard cost per unit $ 48

The master manufacturing overhead budget for the month based on normal productive capacity of 20,000 direct labor hours (10,000 units) shows total variable costs of $80,000 ($4 per labor hour) and total fixed costs of $60,000 ($3 per labor hour). Normal productive capacity is 20,000 direct labor hours. Overhead is applied on the basis of direct labor hours. Actual costs for November in producing 9,800 units were as follows.

Direct material (20,500 pounds) $ 100,450

Direct labor (19,600 hours) 239,120

Variable overhead 78,100

Fixed overhead 59,200

Total manufacturing costs $476,870

The purchasing department normally buys the quantities of raw material that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored. The product were sold for $65 per unit. Selling and administrative expenses were $ 60,500. Assume that the amount of raw material purchased equaled the amount used. Assume income tax rate is 25%.

Instructions:

1. Compute all the materials and labor variances.
2. Compute the total overhead variance.
3. Prepare an Income Statement for the month ended January 31, 2022 for Lucas Corporation.

Lucas Corporation manufactures a single product. The standard cost per unit of product is as follows. The master manufacturing overhead budget for the month based on normal productive capacity of 20,000 direct labor hours (10,000 units) shows total variable costs of $80,000 ( $4 per labor hour) and total fixed costs of $60,000 ( $3 per labor hour). Normal productive capacity is 20,000 direct labor hours. Overhead is applied on the basis of direct labor hours. Actual costs for November in producing 9,800 units were as follows. The purchasing department normally buys the quantities of raw material that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored. The product were sold for $65 per unit. Selling and administrative expenses were $60,500. Assume that the amount of raw material purchased equaled the amount used. Assume income tax rate is 25%. Instructions: 1) Compute all the materials and labor variances. 2) Compute the total overhead variance. 3) Prepare an Income Statement for the month ended January 31, 2022 for Lucas Corporation