Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Java manufacturers coffee mugs that it sells to other companies for customizing with their own logos. Java prepares flexible budgets and uses a standard cost
Java manufacturers coffee mugs that it sells to other companies for customizing with their own logos. Java 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: | ||||||||
Direct materials (0.2 lbs @ $0.25 per lb) | $0.05 | |||||||
Direct labor (3 minutes @ $0.12 per minute) | 0.36 | |||||||
Manufacturing overhead: | ||||||||
Variable (3 minutes @ $0.05 per minute) | $0.15 | |||||||
Fixed (3 minutes @ $0.14 per minute) | 0.42 | 0.57 | ||||||
Total cost per coffee mug | $0.98 | |||||||
Actual cost and production information for July 2012 follow: | ||||||||
a. Actual production and sales were 62,900 coffee mugs. | ||||||||
b. Actual direct materials usage was 10,000 lbs., at an actual price of $0.17 per lb. | ||||||||
c. Actual direct labor usage was 202,000 minutes at a total cost of $30,300. | ||||||||
d. Actual overhead cost was $10,000 variable and $30,500 fixed. | ||||||||
e. Marketing and administrative costs were $115,000. | ||||||||
Requirements: | ||||||||
1. Compute the price and efficiency variances for direct materials and direct labor. | ||||||||
2. Journalize the usage of direct materials and the assignment of direct labor, including the related variances. | ||||||||
3. For manufacturing overhead, compute the variable overhead spending and efficiency variances and the fixed overhead spending and volume variances. | ||||||||
4. Journalize the actual manufacturing overhead and the applied manufacturing overhead. Journalize the movement of all production from WIP. Journalize the closing of the manufacturing overhead account. | ||||||||
5. Java intentionally hired more-skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise? |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started