Material, Labor, and Variable Overhead Variance. This one is an easier one. Glad they are getting a bit easier than the first ones.

Material, Labor, and Variable Overhead Variances The following summarized manufacturing data relate to Thomas Corporation's April operations, during which 2,000 finished units of product were produced. Normal monthly capacity is 1,100 direct labor hours. Standard Units Costs Total Actual Costs Direct material Standard (2 lb. @ $9.00/lb.) $18 Actual (4,200 lb. @ $10.20/lb.) $42,840 Direct labor Standard (0.5 hr. @ $24/hr.) $12 Actual (950 hrs. @ $23.40/hr.) 22,230 Variable overhead Standard (0.5 hr. @ $6/hr.) $3 Actual Total - 6,450 $33 $71,520 Determine the following variances: Do not use negative signs with any of your answers. Next to each variance answer, select either "F" for Favorable or "U" for Unfavorable. Materials Variances Actual cost: Split cost: Standard cost: Materials price Materials efficiency $Answer 0 $Answer 0 $Answer 0 $Answer Answer 0 $Answer Answer 0 Labor Variances Actual cost: Split cost: Standard cost: Labor rate Labor efficiency $Answer 0 $Answer 0 $Answer 0 $Answer Answer 0 $Answer Answer 0 Variable Overhead Variances Actual cost: Split cost: Standard cost: Variable overhead spending Variable overhead efficiency $Answer 0 $Answer 0 $Answer 0 $Answer Answer 0 $Answer Answer 0 Managerial Accounting for Undergraduates First Edition Theodore E. Christensen Chapter L. Scott Hobson 10 Standard Costing and Variance Analysis Cambridge Business Publishers James S. Wallace Learning Objective 1 Define standard costs and describe their use in standard cost accounting. 2 Cambridge Business Publishers, 2017 Standard Costs Costs that should be incurred per unit Prepared at the beginning of the period Used to prepare budgets, record operations, and evaluation performance 3 Cambridge Business Publishers, 2017 Uses of Standard Cost Accounting Manufacturer or service company Comparing Standard Cost Budgets to Actual Results 4 Cambridge Business Publishers, 2017 Learning Objective 2 Develop an overall understanding of the determination of standard costs for direct material, direct labor, and variable overhead. 5 Cambridge Business Publishers, 2017 Direct Material Standards Standard direct material cost per unit = Standard quantity x Standard price = SQ x SP Standard quantity Quality, engineering specifications, skill of laborers, efficiency of equipment Standard price Material quality, supply levels, discounts Standard direct material cost per unit = 2 pounds per unit x $5 per pound = $10 per unit 6 Cambridge Business Publishers, 2017 Direct Labor Standards Standard direct labor cost per unit = Standard hours x Standard wage rate = SH x SR Standard hours Skill of laborers, prior performance, time and motion studies, allowance for breaks and downtime Standard rate Average for all workers involved in production Standard direct labor cost per unit = 5 hours per unit x $10 per hour = $50 per unit 7 Cambridge Business Publishers, 2017 Variable Overhead Standards Standard variable overhead cost per unit = Variable overhead standard capacity x Variable overhead application rate = SC x SR Standard capacity Overhead production base per unit Application rate Variable portion of predetermined overhead rate Standard variable overhead cost per unit = 5 hours per unit x $5 per hour = $25 per unit 8 Cambridge Business Publishers, 2017 Total Standard Costs Standard Unit Product Cost Direct material cost per unit Direct labor cost per unit 50 Variable overhead cost per unit 25 Standard unit product cost 9 $10 $85 Cambridge Business Publishers, 2017 Cost Variances Fezzari Favorable cost variance Actual Standard 10 Cambridge Business Publishers, 2017 Learning Objective 3 Understand and calculate direct materials variances. 11 Cambridge Business Publishers, 2017 Direct Materials Variances 12 Cambridge Business Publishers, 2017 Split CostQuantity Purchased Differs from Quantity Used 13 Cambridge Business Publishers, 2017 Direct Materials Variances Fezzari Actual unit production = 100 bikes SQ = 100 frames AQ purchased = 105 frames 14 AQ used = 101 frames SP = $325 per frame AP = $320 per frame Cambridge Business Publishers, 2017 Learning Objective 4 Understand and calculate direct labor variances. 15 Cambridge Business Publishers, 2017 Direct Labor Variances 16 Cambridge Business Publishers, 2017 Direct Labor Variances Fezzari Actual unit production = 100 bikes SH = 550 hours (5.5 hours per bike) AH = 750 hours 17 SR = $25 per hour AR = $20 per hour Cambridge Business Publishers, 2017 Learning Objective 5 Understand and calculate variable overhead variances. 18 Cambridge Business Publishers, 2017 Variable Overhead Variances 19 Cambridge Business Publishers, 2017 Variable Overhead Variances Fezzari Actual unit production = 100 bikes SH = 200 direct labor hours (2 hours per bike) AH = 250 direct labor hours SR = $7.80 per direct labor hour Actual cost = $1,525 20 Cambridge Business Publishers, 2017 Learning Objective 6 Present and illustrate the use of standard costs in financial statements. 21 Cambridge Business Publishers, 2017 Standard Costs in Financial Statements Fezzari 22 Cambridge Business Publishers, 2017 Service Industry in Focus Environmental Business Consultants Managers Budgeted hours per rate review 23 Staf 40 120 Budgeted hourly rate $200 $120 Total actual hours for 25 reviews 1,200 3,500 Cambridge Business Publishers, 2017 Learning Objective 7 Appendix 10A Present journal entries associated with standard costs. 24 Cambridge Business Publishers, 2017 Journal Entries Templates * * *H (hours) is used in this example instead of C (capacity) since the application base is in terms of direct labor hours. 25 Cambridge Business Publishers, 2017 Journal Entries Illustration 11,000 units produced during the period Direct materials Purchased and used 55,000 pounds at $5.30 per pound Expected to use 44,000 pounds at $5.10 per pound Direct labor Logged 23,000 hours at $10 per hour Expected to log 22,000 hours at $9 per hour Variable Overhead Actual costs of $111,000 Predetermined variable overhead rate of $5 per direct labor hour 26 Cambridge Business Publishers, 2017 Journal Entries Illustration Account (1) (2) Raw materials inventory 280,500 Materials price variance 11,000 Accounts payable (or cash) Work in process inventory Materials efficiency variance (3) Raw materials inventory Work in process inventory Labor rate variance Labor efficiency variance (4) Wages payable (or cash) Work in process inventory Variable overhead efficiency variance Variable overhead spending variance 27 Debit Manufacturing overhead 224,400 Credit 291,500 56,100 198,000 280,500 23,000 9,000 110,000 230,000 5,000 4,000 111,000 Cambridge Business Publishers, 2017 Managerial Accounting for Undergraduates First Edition Cambridge Business Publishers