Question
Hartwell Company manufactures one product, it does not maintain any beginning or ending inventories, and its uses a standard cost system. Its predetermined overhead rate
Hartwell Company manufactures one product, it does not maintain any beginning or ending inventories, and its uses a standard cost system. Its predetermined overhead rate includes $2,358,000 of fixed manufacturing overhead in the numerator and 65,500 direct labor-hours in the denominator. The actual fixed manufacturing overhead for the period was $2,780,800.
The company purchased (with cash) and used 64,000 yards of raw materials at a cost of $11.40 per yard. Its direct laborers worked 40,200 hours and were paid a total of $603,000. The company started and completed 36,000 units of finished goods during the period. Bowens standard cost card for its only product is as follows:
(1) Standard Quantity or Hours | (2) Standard Price or Rate | Standard Cost (1) (2) | |||||
Direct materials | 1 | yards | $ | 12.00 | per yard | $ | 12.00 |
Direct labor | 1.5 | hours | $ | 15.00 | per hour | 22.50 | |
Fixed manufacturing overhead | 1.5 | hours | $ | 36.00 | per hour | 54.00 | |
Total standard cost per unit | $ | 88.50 | |||||
Required:
1. When recording the raw material purchases (on account):
a. The Raw Materials inventory will increase (decrease) by how much?
b. The Cash will increase (decrease) by how much?
c. The materials price variance will be favorable or unfavorable and by how much?
2. When recording the raw materials used in production:
a. The Raw Materials inventory will increase (decrease) by how much?
b. The Work in Process inventory will increase (decrease) by how much?
c. The materials quantity variance will be favorable or unfavorable and by how much?
3. When recording the direct labor costs added to production:
a. The Work in Process inventory will increase (decrease) by how much?
b. The Cash will increase (decrease) by how much?
c. The labor rate and efficiency variances will be favorable or unfavorable and by how much?
4. When applying fixed manufacturing overhead to production:
a. The Work in Process inventory will increase (decrease) by how much?
b. The fixed overhead budget and volume variances will be favorable or unfavorable and by how much?
5. When transferring costs from Work in Process to Finished Goods, the Finished Goods inventory will increase (decrease) by how much?
(Indicate the effect of each variance by selecting "Favorable", "Unfavorable" or "None".)
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