H Flexible Budgets & Standard Cost Systems One of the owners of Nerdzy Computer Company had a midlife crisis and decided to leave the business and start manufacturing soap instead of computers (sound far-fetched... well this is what my stepmom really did). The soap company is called Sudsy Days and it manufactures white labeled soap that it sells to other companies for customizing with their own logos. Sudsy Days prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a jar of soap is based on static budget volume of 59800 soap jugs per month: Direct Materials (0.2 lbs. @ $0.25 per lb.) $0.05 Direct Labor (3 minutes @ $0.11 per minute) 0.33 Manufacturing Overhead: Variable (3 minutes @ $0.06 per minute) 0.18 Fixed (3 minutes @ $0.13 per minute) 0.39 0.57 Total Cost per Soap Jug $0.95 Actual cost and production information for July 2021 follows: a. There were no beginning or ending inventory balances. All expenditures were on account. b. Actual production and sales were 62500 soap jugs. c. Actual direct materials usage was 11000 lbs. at an actual cost of $0.17 per lb. Actual direct labor usage was 197000 minutes at a total cost of $25610. Actual overhead cost was $10835 variable and $29765 fixed. f. Selling and administrative costs were $95000. d. e. 3 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. 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. Sudsy Days intentionally hired more highly skilled workers during July. How did this decision affect the 5 cost variances? Overall, was the decision wise? 7 6 Prepare the standard cost income statement for July. The standard and actual sales price per jug of soap is $3. 24 B 5 Req1 Compute the cost and efficiency variances for direct materials and direct labor. DM Cost Variance Formula: Variance: DM Efficiency Variance Formula: Variance: DL Cost Variance Formula: Variance: DL Efficiency Variance Formula: Variance: Req2 Journalize the purchase and usage of direct materials and the assignment of direct labor, including the related variances Account & Explanation DR CR 3 Purchased Direct Materials Used Direct Materials 1 2 3 4 5 6 -7 8 39 30 Direct Labor Costs incurred Req3 For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances. VOH Cost Variance Formula: Variance: VOH Efficiency Variance Formula: Variance: FOH Cost Variance Formula: Variance: Req4 FOH Volume Variance Formula: Variance 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. Account & Explanation DR CR Various Accounts Manufacturing overhead costs incurred. Manufacturing overhead costs allocated Completed Goods transferred. To adjust manufacturing overhead. Req5 Sudsy Days intentionally hired more highly skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise? Req6 Prepare the standard cost income statement for July. The standard and actual sales price per jug of soap is $3. Sudsy Days Standard Cost Income Statement For the month ended July 31, 2021