Question
Butrico Manufacturing Corporation uses a standard cost system, records materials price variances when direct materials are purchased, and prorates all variances at year-end. Variances associated
Butrico Manufacturing Corporation uses a standard cost system, records materials price variances when direct materials are purchased, and prorates all variances at year-end. Variances associated with direct materials are prorated based on the balances of direct materials in the appropriate accounts, and variances associated with direct labor and manufacturing overhead are prorated to Finished Goods Inventory and to Cost of Goods Sold (CGS) on the basis of the relative direct labor cost in these accounts at year-end.
The following information is for the year ended December 31:
The company had no beginning inventories and no ending Work-in-Process (WIP) Inventory. It applies manufacturing overhead at 80% of standard direct labor cost.
Finished goods inventory at 12/31:
Direct materials$89,610
Direct labor134,415
Applied manufacturing overhead107,532
Direct materials inventory at 12/3165,300
Cost of goods sold for the year ended 12/31:
Direct materials$358,440
Direct labor761,685
Applied manufacturing overhead609,348
Direct materials price variance (unfavorable)10,300
Direct materials usage variance (favorable)15,450
Direct labor rate variance (unfavorable)20,600
Direct labor efficiency variance (favorable)5,150
Actual manufacturing overhead incurred710,700
Required:
1. Compute the amount of Direct Materials Price Variance to be prorated to Finished Goods Inventory at December 31.
2. Compute the total amount ofdirect materials costin the Finished Goods Inventory at December 31, after all materials variances have been prorated.
3. Compute the total amount ofdirect labor costin the Finished Goods Inventory at December 31, after all variances have been prorated.
4. Compute the total Cost of Goods Sold (CGS) for the year ended December 31, after all variances have been prorated.
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