Problem 10-47 Comprehensive Problem on Variance Analysis (LO 10-1, 10-3, 10-6)

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[The following information applies to the questions displayed below.] Springsteen Company manufactures guitars. The company uses a standard, job-order cost-accounting system in two production departments. In the Construction Department, the wooden guitars are built by highly skilled craftsmen and coated with several layers of lacquer. Then the units are transferred to the Finishing Department, where the bridge of the guitar is attached and the strings are installed. The guitars also are tuned and inspected in the Finishing Department. The diagram below depicts the production process.

Each finished guitar contains seven pounds of veneered wood. In addition, one pound of wood is typically wasted in the production process. The veneered wood used in the guitars has a standard price of $12 per pound. The other parts needed to complete each guitar, such as the bridge and strings, cost $15 per guitar. The labor standards for Springsteens two production departments are as follows: Construction Department: 6 hours of direct labor at $20 per hour Finishing Department: 2 hours of direct labor at $15 per hour The following pertains to the month of July. 1. There were no beginning or ending work-in-process inventories in either production department. 2. There was no beginning finished-goods inventory. 3. Actual production was 520 guitars, and 320 guitars were sold on account for $410 each. 4. The company purchased 6,200 pounds of veneered wood at a price of $12.50 per pound. 5. Actual usage of veneered wood was 4,700 pounds of the wood purchased during July. 6. Enough parts (bridges and strings) to finish 620 guitars were purchased at a cost of $9,020. 7. The Construction Department used 2,870 direct-labor hours. The total direct-labor cost in the Construction Department was $54,530. 8. The Finishing Department used 1,100 direct-labor hours. The total direct-labor cost in that department was $17,600. 9. There were no direct-material variances in the Finishing Department.

Problem 10-47 Part 3

3. Complete the following cost variance report for July. Springsteen Company investigates all variances greater than $5,000 or 5%. (Use Exhibit 105.) (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Round "Percentage of Standard Cost" to 2 decimal places.)

SPRINGSTEEN COMPANY Cost Variance Report For the Month of July Construction Department Percentage of Variance Investigation Standard Cost Required Finishing Department Amount Amount Percentage of Standard Cost Variance Investigation Required % % % Direct material: Standard cost, given actual output Direct-material price variance Direct-material quantity variance Direct-material purchase price variance Direct labor Standard cost, given actual output Direct-labor rate variance Direct-labor efficiency variance % % SPRINGSTEEN COMPANY Cost Variance Report For the Month of July Construction Department Percentage of Variance Investigation Standard Cost Required Finishing Department Amount Amount Percentage of Standard Cost Variance Investigation Required % % % Direct material: Standard cost, given actual output Direct-material price variance Direct-material quantity variance Direct-material purchase price variance Direct labor Standard cost, given actual output Direct-labor rate variance Direct-labor efficiency variance % %