Question 2

Please answer the following items. Please clearly identify your final answers. Include your calculations for partial credit.

(A) For Direct Material:

Total DM Variance, indicate Favorable (F) / Unfavorable (U)

Price Variance, indicate Favorable (F) / Unfavorable (U)

Usage Variance, indicate Favorable (F) / Unfavorable (U)

Journal Entries for Acquisition of raw materials

Journal Entries for Use of raw materials

(B) For Direct Labor:

Total DL Variance, indicate Favorable (F) / Unfavorable (U)

Rate Variance, indicate Favorable (F) / Unfavorable (U)

Efficiency (or Qty) Variance, indicate Favorable (F) / Unfavorable (U)

Journal Entries for Acquisition and use of direct labor

(C) Assume Variances are immaterial, prepare adjusting (closing) journal entries for DM and DL variances

(D) For Variable Manufacturing Overhead (VMOH):

Total VMOH Variance, indicate Favorable (F) / Unfavorable (U)

VOH Efficiency Variance, indicate Favorable (F) / Unfavorable (U)

VOH Spending Variance, indicate Favorable (F) / Unfavorable (U)

(E) For Fixed Manufacturing Overhead (FMOH):

Total FMOH Variance, indicate Favorable (F) / Unfavorable (U)

FOH Volume Variance, indicate Favorable (F) / Unfavorable (U)

FOH Spending Variance, indicate Favorable (F) / Unfavorable (U)

Pay attention, FMOH calculation is slightly different than other calculations

Data/Information:

MercyCo had the following budgeted and actual results for June:

Budgeted units 350 units

Actual units 400 units

Direct Materials (DM):

Budgeted DM Quantity per unit 30 lbs/unit

Budgeted DM Price 3.00 $/lb

Actual DM Quantity Used 8,200 lbs

Actual DM Price 3.50 $/lb

Direct Labor (DL):

Budgeted DL Usage per Unit 2 DLH/unit

Budgeted DL Rate 16.00 $/DLH

Actual DL Hours Used 455 hrs

Actual DL Rate 17.00 $/DLH

Manufacturing Overhead (MOH):

Variable Manufacturing Overhead (VMOH)

MercyCo allocates VMOH based on machine-hours (MH)

Predetermined Manufacturing Overhead for VMOH 7 $/MH

Standard Quantity Usage per Unit 5 MH/unit

Actual VMOH Costs 8,500 $

Actual Quantity Usage 1,400 MH

Fixed Manufacturing Overhead (FMOH)

MercyCo also allocates FMOH based on machine-hours (MH):

Predetermined Manufacturing Overhead for FMOH 25 $/MH

Standard Quantity Usage per Unit 6 MH/unit

Actual FMOH Costs 23,000 $

Actual Quantity Usage 1,400 MH