Cole manufactures coffee mugs that it sells to other companies for customizing with their own logos$.$ Cole prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of $59,900$ coffee mugs per month:

$($Click the icon to view the cost data.$)$

Actual cost and production information for July $2024$ follows:

$($Click the icon to view actual cost and production information.$)$

Read the requirements.

Requirement $1.$ Compute the cost and efficiency variances for direct materials and direct labor. FOH$=$ fixed overhead; $SC=$ standard cost; $SQ=$ standard quantity.$)$

Data table

Direct Materials $(0\mathrm{.}2$ lbs @ $$0\mathrm{.}25$ per lb$)$

Direct Labor $(3$ minutes @ $$0\mathrm{.}13$ per minute$)$

Manufacturing Overhead:

Variable $(3$ minutes @ $$0\mathrm{.}04$ per minute$)$

$$,0\mathrm{.}12$

Fixed $(3$ minutes @ $$0\mathrm{.}14$ per minute$)$

Total Cost per Coffee Mug

More info

a$.$ There were no beginning or ending inventory balances. All expenditures were on account.

b$.$ Actual production and sales were $62,600$ coffee mugs.

c$.$ Actual direct materials usage was $10,000lbs.$ at an actual cost of $$0\mathrm{.}17$ per lb$.$

d$.$ Actual direct labor usage was $199,000$ minutes at a total cost of $$29,850.$

e$.$ Actual overhead cost was $$5,970$ variable and $$34,430$ fixed.

f$.$ Selling and administrative costs were $$108,000.$

Requirements

Compute the cost and efficiency variances for direct materials and direct labor.

Journalize the purchase and usage of direct materials and the assignment of direct labor, including the related variances.

For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances.

Journalize the actual manufacturing overhead and the allocated manufacturing overhead. Journalize the movement of all production costs from Work$-$in$-$Process Inventory. Journalize the adjusting of the Manufacturing Overhead account.

Cole intentionally hired more highly skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise?