Question
Marjorie Corporation manufactures a single product. The standard cost per unit of product is as follows. Direct materials 2 pounds of plastic at $6 per
Marjorie Corporation manufactures a single product. The standard cost per unit of product is as follows.
Direct materials 2 pounds of plastic at $6 per pound $ 12
Direct labor 2 hours at $10 per hour 20
Variable manufacturing overhead 9
Fixed manufacturing overhead 8
Total standard cost per unit $ 49
The master manufacturing overhead budget for the month based on normal productive capacity of 24,000 direct labor hours (12,000 units) shows total variable costs of $83,000 ($8.5 per labor hour) and total fixed costs of $65,000 ($7.5 per labor hour). Normal productive capacity is 25,000 direct labor hours. Overhead is applied on the basis of direct labor hours. Actual costs for November in producing 11,300 units were as follows.
Direct material (22,300 pounds) $ 122,204.00
Direct labor (18,750 hours) 259,687.50
Variable overhead 82,690.00
Fixed overhead 69,800.00
Total manufacturing costs $534,381.50
The purchasing department normally buys the quantities of raw material that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored. The product were sold for $82.50 per unit. Assume that the amount of raw material purchased equaled the amount used.
Instructions:
- Compute all of the materials and labor variances.
- Compute the total overhead variance.
- Compute the total variance
- Comment on managements efficiency in controlling manufacturing overhead costs
- Prepare an Income Statement for the month ended January 31, 2019 for Lucas Corporation. Remember the operating expenses should be divided in Selling Expenses and Administrative Expenses. Other accounts that you must use are:
| Account Name | Amount |
| Advertising expenses | $26,000 |
| Delivery Expense | $6,500 |
| Depreciation expense Office Equipment | $15,900 |
| Gain from sale of machinery | $17,520 |
| Insurance expense administrative building | $21,870 |
| Interest expense | $1,982 |
| Interest Revenue | $28,900 |
| Loss from sale of equipment | $3,500 |
| Rent Expense - Administrative | $24,000 |
| Salaries expense - Executive | $22,500 |
| Sales salaries expenses | $35,900 |
| Supplies expense store building | $1,850 |
| Income taxes | 32.75% |
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