P11-2A Compute variances, and prepare income statement

Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2017.

Cost and Production Data

Actual

Standard

Raw materials unit cost

$2.30

$2.10

Raw materials units used

11,000

10,000

Direct labor payroll

$120,960

$120,000

Direct labor hours worked

14,400

15,000

Manufacturing overhead incurred

$189,500

Manufacturing overhead applied

$189,000

Machine hours expected to be used at normal capacity

42,500

Budgeted fixed overhead for June

$55,250

Variable overhead rate per machine hour

$3.00

Fixed overhead rate per machine hour

$1.30

Overhead is applied on the basis of standard machine hours. Three hours of machine time are

required for each direct labor hour. The jobs were sold for $400,000. Selling and administrative

expenses were $40,000. Assume that the amount of raw materials purchased equaled the amount

used.

Instructions

(a) Compute all of the variances for (1) direct materials and (2) direct labor.

(b) Compute the total overhead variance.

(c) Prepare an income statement for management. (Ignore income taxes.)

NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

(a)(1)	Total Materials Variance:
	(	AQ	X	AP	)	minus	(	SQ	X	SP)	)
	(	Value	X	Value	)	minus	(	Value	X	Value	)
	=	?	minus	?	=	Value
	Materials price variance:
	(	AQ	X	AP	)	minus	(	AQ	X	SP	)
	(	Value	X	Value	)	minus	(	Value	X	Value	)
	=	?	minus	?	=	Value
	Materials quantity variance:
	(	AQ	X	SP	)	minus	(	SQ	X	SP	)
	(	Value	X	Value	)	minus	(	Value	X	Value	)
	=	?	minus	?	=	Value
(a)(2)	Total Labor Variance:
	(	AH	X	AR	)	minus	(	SH	X	SR	)
	(	Value	X	Value	)	minus	(	Value	X	Value	)
	=	?	minus	?	=	Value
	Labor Price variance:
	(	AH	X	AR	)	minus	(	AH	X	SR	)
	(	Value	X	Value	)	minus	(	Value	X	Value	)
	=	?	minus	?	=	Value
	Labor quantity variance:
	(	AH	X	SR	)	minus	(	SH	X	SR	)
	(	Value	X	Value	)	minus	(	Value	X	Value	)
	=	?	minus	?	=	Value
(b)	Total Overhead Variance:
	=	Actual	minus	Overhead
		Overhead		Applied
	=	Value	minus	Value	=	Value
(c )	AYALA CORPORATION
	Income Statement
	For the Month Ended June 30, 2017
	Sales revenue							Value
	Cost of goods sold (at standard)							?
	Gross profit (at standard)							?
	Variances
	Material price					Value
	Materials quantity					Value
	Labor price					Value
	Labor quantity					Value
	Overhead					Value
	Total variance - favorable							?
	Gross profit (actual)							?
	Selling and administrative expenses							Value
	Net income							?