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Continuous improvement (continuation of 7-24). The Monroe Corporation sets monthly standard costs using a continuous-improvement approach. In January 2012, the standard direct material cost is
Continuous improvement (continuation of 7-24). The Monroe Corporation sets monthly standard costs using a continuous-improvement approach. In January 2012, the standard direct material cost is $45 per unit and the standard direct manufacturing labor cost is $15 per unit. Due to more efficient operations, the standard quantities for February 2012 are set at 0.980 of the standard quantities for January. In March 2012, the standard quantities are set at 0.990 of the standard quantities for February 2012. Assume the same information for March 2012 as in Exercise 7-24, except for these revised standard quantities. 1. Compute the March 2012 standard quantities for direct materials and direct manufacturing labor (to Required three decimal places). 2. Compute the March 2012 price and efficiency variances for direct materials and direct manufacturing labor (round to the nearest dollar). 7-24 Price and efficiency variances, journal entries. The Monroe Corporation manufactures lamps. It has set up the following standards per finished unit for direct materials and direct manufacturing labor: Direct materials: 10 lb. at $4.50 per lb. $45.00 Direct manufacturing labor: 0.5 hour at $30 per hour 15.00 The number of finished units budgeted for January 2012 was 10,000; 9,850 units were actually produced. Actual results in January 2012 were as follows: Direct materials: 98,055 lb. used Direct manufacturing labor: 4,900 hours $154,350 Assume that there was no beginning inventory of either direct materials or finished units. During the month, materials purchased amounted to 100,000 lb., at a total cost of $465,000. Input price variances are isolated upon purchase. Input-efficiency variances are isolated at the time of usage 1. Compute the January 2012 price and efficiency variances of direct materials and direct manufactur- Required ing labor. 2. Prepare journal entries to record the variances in requirement 1. 3. Comment on the January 2012 price and efficiency variances of Monroe Corporation. 4. Why might Monroe calculate direct materials price variances and direct materials efficiency variances with reference to different points in time 8-23 Straightforward coverage of manufacturing overhead, standard-costing system. The Singapore division of a Canadian telecommunications company uses standard costing for its machine-paced production of telephone equipment. Data regarding production during June are as follows: Variable manufacturing overhead costs incurred $618,840 Variable manufacturing overhead cost rate $8 per standard machine-hour Fixed manufacturing overhead costs incurred $145,790 Fixed manufacturing overhead costs budgeted $144,000 Denominator level in machine-hours 72,000 Standard machine-hour allowed per unit of output 1.2 Units of output 65,500 Actual machine-hours used 76,400 Ending work-in-process inventory 0 1. Prepare an analysis of all manufacturing overhead variances. Use the 4-variance analysis framework illustrated in Exhibit 8-4 (p. 277). 2. Prepare journal entries for manufacturing overhead costs and their variances. 3. Describe how individual variable manufacturing overhead items are controlled from day to day. 4. Discuss possible causes of the variable manufacturing overhead variances. 10-24 Estimating a cost function, high-low method. Laurie Daley is examining customer-service costs in the southern region of Capitol Products. Capitol Products has more than 200 separate electrical products that are sold with a six-month guarantee of full repair or replacement with a new product. When a product is returned by a customer, a service report is prepared. This service report includes details of the problem and the time and cost of resolving the problem. Weekly data for the most recent 8-week period are as follows: Week Customer-Service Department Costs Number of Service Reports 1 $13,700 190 2 20,900 275 3 13,000 115 4 18,800 395 5 14,000 265 6 21,500 455 7 16,900 340 8 21,000 305 1. Plot the relationship between customer-service costs and number of service reports. Is the relation- Required ship economically plausible? 2. Use the high-low method to compute the cost function, relating customer-service costs to the number of service reports. 3. What variables, in addition to number of service reports, might be cost drivers of weekly customerservice costs of Capitol Products
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