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Haliburton Mills Inc. is a large producer of mens and womens clothing. The company uses standard costs for all of its products. The standard costs

Haliburton Mills Inc. is a large producer of mens and womens clothing. The company uses standard costs for all of its products. The standard costs and actual costs for a recent period are given below for one of the companys product lines (per unit of product):

Direct materials:
Standard: 4.0 metres at $5.00 per metre $ 20.00
Actual: 4.4 metres at $4.75 per metre $ 20.90
Direct labour:
Standard: 3.0 hours at $4.50 per hour 13.50
Actual: 2.6 hours at $4.85 per hour 12.61
Variable manufacturing overhead:
Standard: 3.0 hours at $2.80 per hour 8.40
Actual: 2.6 hours at $3.30 per hour 8.58
Fixed manufacturing overhead:
Standard: 3.0 hours at $4.40 per hour 13.20
Actual: 2.6 hours at $4.45 per hour 11.57
Total cost per unit $ 55.10 $ 53.66

Actual costs: 5,100 units at $53.66$273,666Standard costs: 5,100 units at $55.10 281,010Difference in costfavourable$7,344

During this period, the company produced 5,100 units of product. A comparison of standard and actual costs for the period on a total cost basis is also given above.

There was no inventory of materials on hand to start the period. During the period, 22,440 metres of materials was purchased and used in production. The denominator level of activity for the period was 13,500 hours.

Required:

1. For direct materials:

a. Compute the price and quantity variances for the period. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

Price varianceQuantity variance

b. Prepare journal entries to record all activity relating to direct materials for the period.

2. For direct labour:

a. Compute the rate and efficiency variances. (Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

Labour rate variance
Labour efficiency variance

b. Prepare a journal entry to record the incurrence of direct labour cost for the period. (List debit entries first).

erhead spending and efficiency variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

Variable overhead spending variance
Variable overhead efficiency variance

4. Compute the fixed overhead budget and volume variances. (Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

Fixed overhead budget variance
Fixed overhead volume variance

5. On seeing the $7,344 total cost variance, the companys president stated, Its obvious that our costs are well under control. Do you agree?

multiple choice

Yes

No

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