Drummond Company manufactures coffee mugs that it sells to other companies for customizing with their own logos. Drummond Company 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 60,200 coffee mugs per month: View the standard cost data. Actual cost and production information for July 2025 follows: View the actual cost and production information. Read the requirements. 1. Compute the cost and efficiency variances for direct materials and direct labor. 2. Journalize the purchase and usage of direct materials and the assignment of direct labor, including the related variances. 3. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances. 4. 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. 5. Drummond Company intentionally hired more highly skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise? Standard Cost Data Direct Materials (0.2 lbs @ $0.25 per lb) Direct Labor (3 minutes @ $0.30 per minute) Manufacturing Overhead: Variable (3 minutes @ $0.05 per minute) Fixed (3 minutes @ $0.14 per minute) Total Cost per Coffee Mug $ 0.05 0.90 $ 0.15 0.42 0.57 $ 1.52 Actual Cost and Production Information a. There were no beginning or ending inventory balances. All expenditures were on account. b. Actual production and sales were 62,900 coffee mugs. c. Actual direct materials usage was 10,000 lbs. at an actual cost of $0.17 per lb. d. Actual direct labor usage was 202,000 minutes at a total cost of $64,640. e. Actual overhead cost was $10,000 variable and $30,500 fixed. f. Selling and administrative costs were $115,000. Requirement 1. Compute the cost and efficiency variances for direct materials and direct labor. (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQA = standard quantity allowed.) Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor. (Label the variance as favorable (F) or unfavorable (U), in the input field after the amount you enter.) Formula Direct materials cost variance = (1) Variance |(2) |(4) Direct labor cost variance (3) Select the required formulas, compute the efficiency variances for direct materials and direct labor. (Label the variance as favorable (F) or unfavorable (U), in the input field after the amount you enter.) Formula Direct materials efficiency variance = (5) Direct labor efficiency variance (7) Variance (6) (8) Requirement 2. Journalize the purchase and usage of direct materials and the assignment of direct labor, including the related variances. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Begin by journalizing the purchase of direct materials, including the related variance. (Prepare a single compound journal entry.) Date Jul. Accounts and Explanation (9) (10) (11) Debit Credit (12) (13) Now, journalize the usage of direct materials, including the related variance. (Prepare a single compound journal entry.) Date Accounts and Explanation Jul. (14) (15) (16) (17) (18) Debit Credit Journalize the incurrance and assignment of direct labor costs, including the related variances. (Prepare a single compound journal entry.) Date Accounts and Explanation Jul. (19) (20) (21) (22) (23) Debit Credit Requirement 3. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances. (Round any interim calculations to four decimal places, X.XXXX, and your final answers to the nearest whole dolllar. Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQA = standard quantity allowed; VOH = variable overhead.) Begin with the variable overhead cost and efficiency variances. Select the required formulas, compute the variable overhead cost and efficiency variances. (Label the variance as favorable (F) or unfavorable (U), in the input field after the amount you enter.) VOH cost variance VOH efficiency variance Formula (24) (26) Variance (25) |(27) Now compute the fixed overhead cost and volume variances. Select the required formulas, compute the fixed overhead cost and volume variances. (Label the variance as favorable (F) or unfavorable (U), in the input field after the amount you enter.) Variance Formula FOH cost variance (28) FOH volume variance (30) (29) (31) Requirement 4. 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. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Begin by journalizing the entry to show the actual manufacturing overhead costs incurred. Date Accounts and Explanation Jul. (32) (33) |(34) (35) (36) Journalize the applied manufacturing overhead. Debit Credit Date Accounts and Explanation Debit Credit Jul. (37) (38) (39) (40) (41) Journalize the movement of all production from Work-in-Process Inventory. Date Accounts and Explanation Jul. (42) (43) (44) (45) (46) Debit Credit Journalize the adjusting of the Manufacturing Overhead account. (Prepare a single compound journal entry.) Date Accounts and Explanation Jul. (47) (48) (49) (50) (51) (52) (53) Debit Credit Requirement 5. Drummond Company intentionally hired more highly skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise? Hiring more-skilled, higher-paid labor led to (54) direct labor efficiency variance, it (56). appear that these more-skilled workers performed efficiently. The overall net effect is (57) direct labor cost variance. Given the (55) thus management's decision was (58).