Case 10-50 Missing Data; Variances, Ledger Accounts (Appendix) (LO 10-1, 10-3, 10-9)

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[The following information applies to the questions displayed below.] MacGyver Corporation manufactures a product called Miracle Goo, which comes in handy for just about anything. The thick tarry substance is sold in six-gallon drums. Two raw materials are used; these are referred to by people in the business as A and B. Two types of labor are required also. These are mixers (labor class I) and packers (labor class II). You were recently hired by the company president, Pete Thorn, to be the controller. You soon learned that MacGyver uses a standard-costing system. Variances are computed and closed into Cost of Goods Sold monthly. After your first month on the job, you gathered the necessary data to compute the months variances for direct material and direct labor. You finished everything up by 5:00 p.m. on the 31st, including the credit to Cost of Goods Sold for the sum of the variances. You decided to take all your notes home to review them prior to your formal presentation to Thorn first thing in the morning. As an afterthought, you grabbed a drum of Miracle Goo as well, thinking it could prove useful in some unanticipated way. You spent the evening boning up on the data for your report and were ready to call it a night. As luck would have it though, you knocked over the Miracle Goo as you rose from the kitchen table. The stuff splattered everywhere, and, most unfortunately, obliterated most of your notes. All that remained legible is the following information.

Direct Material A: Quantity Variance
	2,600

Direct Material B: Purchase Price Variance
	1,000

Direct Labor I: Rate Variance
	400

Direct Labor II: Efficiency Variance
	1,100

Cost of Goods Sold
	135,000
		1,760

Accounts Payable
		1,700	Beg. bal.
	65,000	75,000
		11,700	End. bal.

Other assorted data gleaned from your notes:

• The standards for each drum of Miracle Goo include 10 pounds of material A at a standard price of $5 per pound.
• The standard cost of material B is $16 for each drum of Miracle Goo.
• Purchases of material A were 12,000 pounds at $4.50 per pound.
• Given the actual output for the month, the standard allowed quantity of material A was 9,000 pounds. The standard allowed quantity of material B was 7,200 gallons.
• Although 10,000 gallons of B were purchased, only 7,000 gallons were used.
• The standard wage rate for mixers is $16 per hour. The standard labor cost per drum of product for mixers is $48 per drum.
• The standards allow 5 hours of direct labor II (packers) per drum of Miracle Goo. The standard labor cost per drum of product for packers is $55 per drum.
• Packers were paid $10.90 per hour during the month.

You happened to remember two additional facts. There were no beginning or ending inventories of either work in process or finished goods for the month. The increase in accounts payable relates to direct-material purchases only. Now youve got a major problem. Somehow youve got to reconstruct all the missing data in order to be ready for your meeting with the president. You start by making the following list of the facts you want to use in your presentation. Before getting down to business, you need a brief walk to clear your head. Out to the trash you go, and toss the remaining Miracle Goo.

2. Compute the following amounts related to direct material at MacGyver for the month. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Round "Standard price" "Standard cost per drum" and "Actual price" to 2 decimal places.)