Problem 1

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

Eastern Polymers, Inc., processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 5,600 units of product were as follows:

	Standard Costs		Actual Costs
Direct materials	7,800 lbs. at $4.60		7,700 lbs. at $4.50
Direct labor	1,400 hrs. at $16.70		1,430 hrs. at $16.90
Factory overhead	Rates per direct labor hr.,
	based on 100% of normal
	capacity of 1,460 direct
	labor hrs.:
		Variable cost, $3.90	$5,410 variable cost
		Fixed cost, $6.20	$9,052 fixed cost

Each unit requires 0.25 hour of direct labor.

Problem 2

L'Essence Cosmetics Company is planning a one-month campaign for June to promote sales of one of its two cosmetics products. A total of $80,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign:

		Moisturizer		Perfume
Unit selling price		$47		$52
Unit production costs:
	Direct materials	$ 8		$11
	Direct labor	3		4
	Variable factory overhead	2		3
	Fixed factory overhead	5		5
	Total unit production costs	$18		$23
Unit variable selling expenses		15		14
Unit fixed selling expenses		8		6
	Total unit costs	$41		$43
Operating income per unit		$ 6		$ 9

No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 19,000 additional units of moisturizer or 16,000 additional units of perfume could be sold without changing the unit selling price of either product.

-Prepare a differential analysis as of June 15, 2014, to determine whether to promote moisturizer (Alternative 1) or perfume (Alternative 2). If an amount is zero, enter zero "0".

Problem 3

The capital investment committee of Cross Continent Trucking Inc. is considering two capital investments. The estimated income from operations and net cash flows from each investment are as follows:

	Warehouse					Tracking Technology
Year	Income from Operations		Net Cash Flow			Income from Operations		Net Cash Flow
1	$33,000		$102,000			$69,000		$163,000
2	33,000		102,000			53,000		138,000
3	33,000		102,000			26,000		97,000
4	33,000		102,000			12,000		66,000
5	33,000		102,000			5,000		46,000
Total	$165,000		$510,000			$165,000		$510,000

Each project requires an investment of $440,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 12% for purposes of the net present value analysis.

Problem 4

Alabama Paper Company manufactures three products (computer paper, newsprint, and specialty paper) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows:

Activity		Activity Cost Pool
Production			$394,200
Setup			282,800
Moving			65,700
Shipping			127,100
Product Engineering			64,500
	Total		$934,300

The activity bases identified for each activity are as follows:

Activity	Activity Base
Production	Machine hours
Setup	Number of setups
Moving	Number of moves
Shipping	Number of customer orders
Product Engineering	Number of test runs

The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:

		Machine Hours	Number of Setups	Number of Moves	Number of Customer Orders	Number of Test Runs	Units
Computer Paper		3,210	180	180	820	50	8,025
Newsprint		2,040	270	270	2,260	320	5,100
Specialty Paper		2,050	250	450	1,020	130	5,125
	Total	7,300	700	900	4,100	500	18,250

Each product requires 0.9 machine hour per unit.

a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number Price variance Quantity variance Total direct materials cost variance Favorable FavorableY Favorable Favorable Y