Mcknight manufactures coffee mugs that it sells to other companies for customizing with their own logos. McKnight
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 59,700 coffee mugs per person.:
Actual cost and production information for July 2018 follows:
Actual cost and production info i (Click the icon to view actu McKnight manufactures coffee mugs that it sells to other companies for customizing with their own logos. McKnight prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug based on static budget volume of 59,700 coffee mugs per month: FB(Click the icon to view the cost data.) Read the reguirements Requirement 1. Compute the cost and efficiency variances for direct materials and direct labor Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance favorable (F) or unfavorable (U). ( Formula Variance Direct materials cost variance Direct labor cost variance nda - X i More Info a. There were no beginning or ending inventory balances. All expenditures were on C account. b. Actual production and sales were 62,400 coffee mugs. hce c. Actual direct materials usage was 10,000 lbs. at an actual cost of $0.17 per lb. d. Actual direct labor usage was 203,000 minutes at a total cost of $30,450 e. Actual overhead cost was $6,090 variable and $34,810 fixed. Selling and administrative costs were $126,000 f. Print Done - X i More Info a. There were no beginning or ending inventory balances. All expenditures were on account. b. Actual production and sales were 62,400 coffee mugs. c. Actual direct materials usage was 10,000 lbs. at an actual cost of $0.17 per lb. 203,000 minutes at a total cost of $30,450 d. Actual direct labor usage was Actual overhead cost was $6,090 variable and $34,810 fixed Selling and administrative costs were $126,000. e. f. Print Done - X Requirements ble 1. Compute the cost and efficiency variances for direct materials and direct labor 2. Journalize the purchase and usage of direct materials and the assignmeent of direct labor, including the related variances. 3. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances 4. Journalize the actual manufacturing overhead and the allocated manufacturing overhead. Journalize the movement of all production costs from Work-in-Process Inventory. Journalize the adjusting of the Manufacturing Overhead account. 5. McKnight intentionally hired more highly skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise? Print Done - X i Data Table (0.2 lbs @ S 0.25 per lb) S Direct Materials 0.05 (3 minutes@S 0.12 per minute) Direct Labor 0.36 Manufacturing Overhead: S 0.04 per minute) S Variable (3 minutes@ 0.12 0.39 0.51 ( 3 minutes@ S 0.13 per minute) Fixed S 0.92 Total Cost per Coffee Mug Print Done . X i More Info There were no beginning or ending inventory balances. All expenditures were on . account b. Actual production and sales were 62,400 coffee mugs Actual direct materials usage was 10,000 lbs. at an actual cost of $0.17 per lb. d. Actual direct labor usage was 203,000 minutes at a total cost of $30,450 C. Actual overhead cost was $6,090 variable and $34,810 fixed. e. Selling and administrative costs were $126,000 f. Print Done - X Requirements Compute the cost and efficiency variances for direct materials and dire ct 1. labor 2. Journalize the purchase and usage of direct materials and the assignment of direct labor, including the related variances. 3. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances. 4. Journalize the actual manufacturing overhead and the allocated manufacturing overhead. Journalize the movement of all production costs from Work-in-Process Inventory. Journalize the adjusting of the Manufacturing Overhead account 5. McKnight intentionally hired more highly skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise? Print Done
