Problem 1 Part A. The standard cost of Product 245 manufactured by the Clayton Company includes 4 yards of direct materials at $3.50 per yard. During 2012, a total of 70,200 yards of material was purchased at a cost of $3.75 per yard , and all of the direct materials were used to produce 18,000 units of Product 245. Instructions

1) Compute the materials price and quantity variances for the year..

(a) Materials price variance $___________________________

(b) Materials quantity variance $_________________________

2) Journalize the purchase of the materials and the issuance of the materials, assuming a standard cost system. Purchase: Issuance to production:

Part B. The standard labor cost of producing one unit of Product 245 is 1.5 hours at the rate of $8.00 per hour. During the year, 29,250 of direct labor hours were incurred at a cost of $7.80 per hour to produce the 18,000 units of Product 245. Instructions: 1) Compute the labor rate and labor efficiency variances.

(a) Labor rate variance $_______________________

(b) Labor efficiency variance $_______________________

2) Journalize the incurrence of the labor cost to production assuming a standard cost system.

Part C. The standard cost card for one unit of Product 245 shows the variable overhead is assigned to the unit based on 1.5 direct labor hours at $2 per hour. The company incurred 29,250 direct labor hours to produce 18,000 units of product 245. The standard was 1.5 hours to produce one unit The actual variable overhead costs incurred was $61,425. Instructions: Compute the variable overhead rate and efficiency variances for the year.

(a) Variable overhead rate variance $________________________

(b) Variable overhead efficiency variance $___________________

Part D. The company produced 18,000 units of product 245 in 2012 and the standard direct labor hours was 1.5 hours to produce one unit. The denominator activity level was 22,500 direct labor hours and the standard cost card shows the fixed overhead is assigned to each unit is based on 1.5 direct labor hours at $6 per hour. The budgeted fixed overhead costs was $135,000 and the actual fixed overhead costs incurred was $133,200. Instructions: Compute the fixed manufacturing overhead budget and volume variances for the year.

(a) Budget variance $_____________________________

(b) Volume variance $____________________________