P12-42A

(SO 2, 3, 4)

Calculate variances and prepare an income statement.

Soriano Manufacturing Company uses a standard cost accounting system to account for the manufacturing of exhaust fans. In July 2016, it accumulates the following data for 1,500 units started and finished:

Cost and Production Data	Actual	Standard
Raw materials
Units purchased	21,000
Units used	21,000	22,000
Unit cost	$3.40	$3.00
Direct labour
Hours worked	3,450	3,600
Hourly rate	$11.80	$12.50
Manufacturing overhead
Incurred	$101,500
Applied		$108,000

Manufacturing overhead was applied based on direct labour hours. Normal capacity for the month was 3,400 direct labour hours. At normal capacity, budgeted overhead costs were $20 per labour hour variable and $10.00 per labour hour fixed. Total budgeted fixed overhead costs were $34,000.

Jobs finished during the month were sold for $280,000. Selling and administrative expenses were $25,000.