Question
O'Shea Company manufactures ceramic vases. It uses standard costing system when developing its flexible-budget amounts. In September 2017, O'Shea produced 2,000 finished units. The following
O'Shea Company manufactures ceramic vases. It uses standard costing system when developing its flexible-budget amounts. In September 2017, O'Shea produced 2,000 finished units. The following information relates to its two direct materials manufacturing cost categories: direct materials and direct manufacturing labor.
Direct materials used were 4,400 kilograms. The standard direct materials input allowed for one output unit is 2 kilograms at $15 per kilogram. O'Shea purchased 5,000 kilograms of materials at $16.50 per kilogram, a total of $82,500.
Actual direct manufacturing labor-hours were 3,250, at a total cost of $66,300. Standard manufacturing labor time allowed is 1.5 hours per output unit, and the standard direct manufacturing labor cost is $20 per hour.
- Calculate the dircect materials price variance and efficiency variance and the direct manufacturing labor price variance and efficiency variance. Base the direct materials price variance on a flexible budget for actual quantity purchased, but base the direct materials efficiency variance on a flexible budget for actual quantity used.
- Prepare journal entries for a standard costing system that isolates variances at the earlies possible time.
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