Jerry Saguenay and Leroy Kingston are partners in a prescription drug company that manufactures "Uncle Jerry's Fat Free Hair Restorer". This magnificent elixir is taken internally and is designed to restore hair to those men (and women) who suffer from "male pattern baldness" and to help "burrn off" fat overnight as you sleep. The drug has been thoroughly tested and approved by the FDA and sales early on have been outstanding. This is especially true since they have obtained endorsements from major stars who have used the product and have been singing its praises in all forms of media. To manufacture the product, the company uses a standard cost system that actually incorporates standard costs into the accounting records. The following standards have been established for each 100 gallon batch of the drug. Normal capacity is 6,000 gallons per year with 2,000 machine hours in the Bottling Department. The company had no beginning inventory of direct materials or finished goods. COMPANY STANDARDS FOR BOTTLING DEPARTMENT FOR PRODUCTION OF UNCLE JERRY'S FAT FREE HAIR RESTORER Direct Materials: Ethyl Follicolate (Secret Ingredient 1 (SI 1) Chlorocellulite (Secret Ingredient 2 (SI 2) 60 gallons at S 40 gallons at $ 2.50 per gallon 3.50 per gallon Direct Labor: Mixing Bottling 6 hours at S 4 hours at $ 8.00 per hour 7.50 per hour Variable Manufacturing Overhead: Mixing Department (applied on basis of labor hours) S 3.25 per hour Bottling Department (applied on basis of machine hours) 4.50 per hour Fixed Manufacturing Overhead: Mixing Department (applied on basis of labor hours) 55,000 Bottling Department (applied on basis of machine hours) 75,000 The actual results for the year ending June 30, 20X5 are provided below COMPANY ACTUAL RESULTS FOR BOTTLING DEPARTMENT FOR PRODUCTION OF UNCLE JERRY'S FAT FREE HAIR RESTORER FOR YEAR ENDING JUNE 30, 20X5 Direct Materials Purchased: SI i Si 2 3,500 gallons at S 2.30 per gallorn 2,000 gallons at S 4.00 per gallon Direct Materials Used: 3,200 gallons 1,800 gallons SI 1 S12 Direct Labor: Mixing 275 hours at a total cost of $ 2,270 225 hours at a total cost of S 1,600 Bottling Variable Manufacturing Overhead: Mixing Department Bottling Department (applied on basis of machine hours) S 7,850 S 850 Fixed Manufacturing Overhead: Mixing Department (applied on basis of labor hours)S 50,000 Bottling Department (applied on basis of machine hours) S 72,000 The company actually produced 5,000 gallons of the drug during the year. The Bottling Department used 1,500 machine hours during the year. The company had 100 gallons of beginning and ending work in process inventories. 75% of what was transferred to finished goods during the pend was sold for $140,000 on account. REQUIRED: (1) Compute the following production cost variances for the company. Round all calculations to the nearest whole dollar. (ee matcrals price and quanity variances in total for both materials combined. Direct materials mix and yield variances in total for both materials combined. Direct labor rate and efficiency variances in total for both labor types (Mixing and Bottling) combined (b) (e) (d) Diect labor mix and yield variances in total for both labor types combined Variable manufacturing overhead spending and efficiency variances for both departments (Mixing and Bottling) combined. (e) () Fixed manufacturing overhead spending and volume variances for both departments combined. (2) Prepare all journal entries, in proper general journal form, to record all transactions for the year, in summary form, using a standard cost system. Prorate the variances, assuming they are considered significant by management, to allow the company to arrive at actual costs for the period. Round all percentages for the calculations to two decimal places (four decimal places in all) and all dollar amounts to the nearest whole dollar. (3)
