Search by term or phrase Extending Your Knowledge 414 ') 414 Chapter 10 Standard Costing and Variance Analysis 9 C mybusinesscourse.com 0' E1 ' non Assume that Sanchez (1) actually produced 9,000 units, (2) used 17,000 pounds of direct materials in production, (3) and incuned the follovn'ng actual total costs: Direct materials purchased (19,000 lb. @ 7.80) ................................... $148,200 Direct labor (14.000 hr. 0 $13.35) ............. 186.900 Variable overhead ....................... 80.250 Fixed overhead ....................... 144,000 Total actual costs ........................................................ $559.350 Required a. Calculate the variances for materials, labor, and variable overhead. b. Does the difference between total actual costs and total standard costs equal the sum of all of the variances? Explain. EXTENDING YOUR KNOWLEDGE EYKlO-l. Business Decision Case Porter Corporation has just hired Bill Harlow as its new controller. Al- though Harlow has had little formal accounting training, he professes to be highly experienced, having learned accounting \"the hard way" in the eld. At the end of his first month's work, Harlow X E prepared the following performance report: O V mybusinesscourse.com Social Media Assignment Untitled document - Google Docs mabe M6: MBC Exercises Ch. 10 & 11 Santa Claus Is Comin' to Town -... M6 Business Analysis Case - EY. be Managerial Accounting for Unde... + Auto Zoom 414 Search by term or phrase Total Actual Total Budgeted eyk10 Costs Costs Variances Direct materials. . . $216,630 $237,600 $20,970 F Direct labor . . . . . . 119,340 132,000 12,660 F Extending Your Knowledge 413 Variable overhead 63,000 66,000 3,000 F Cambridge Business Publishers Chapter 10 Fixed overhead. . . . .. 184,000 184,000 Standard Costi ... $582,970 $619,600 $36,630 F Extending Your Knowledge 414 In his presentation at Porter's month-end management meeting, Harlow indicated that things 414 Chapter 10 Standard Costing and Variance were going "fantastically." "The figures indicate," he said, "that the firm is beating its budget in Analysis @ C ... all cost categories." This good news made everyone at the meeting happy and furthered Harlow's acceptance as a member of the management team. After the management meeting, Susan Jones, Porter's general manager, asked you, as an inde- pendent consultant, to review Harlow's report. Jones' concern stemmed from the fact that Porter has never operated as favorably as Harlow's report seems to imply, and she cannot explain the apparent significant improvement. While reviewing Harlow's report, you are provided the following cost and operating data for June: Porter has a monthly normal capacity of 11,000 direct labor hours or 8,800 units of product. Standard costs per unit for its only product are direct materials 3 pounds at $9 per pound; direct labor, 1.25 hours at $12 per hour; and variable overhead rate per direct labor hour of $6. During June, Porter produced 8,000 units of product, using 24,900 pounds of materials costing $8.70 each, 10,200 direct labor hours at an average rate of $11.70 each, and incurred variable overhead costs of $63,000 and fixed overhead costs of $184,000. After reviewing Porter's June cost data, you tell Harlow that his cost report contains a classic budgeting error, and you explain how he can remedy it. In response to your suggestion, Harlow revises his report as follows: Total Actual Total Budgeted Costs Costs Variances Direct materials. . $216,630 $216,000 $ 630 U Direct labor . . 119,340 120,000 660 F Variable overhead 63,000 60,000 3,000 U Fixed overhead. .. 184,000 184,000 $582,970 $580,000 $2,970 U O V mybusinesscourse.com C Social Media Assignment Untitled document - Goo... unbe M6: MBC Exercises Ch. 1... Santa Claus Is Comin' to... M6 Business Analysis Ca.. anbre Managerial Accounting fo.. *Homework Help - Q&A fr... + Eon erQ E W B ) Auto Zoom 414 Search by term or phrase all cost categories." This good news made everyone at the meeting happy and furthered Harlow's acceptance as a member of the management team. eyk10 After the management meeting, Susan Jones, Porter's general manager, asked you, as an inde- pendent consultant, to review Harlow's report. Jones' concern stemmed from the fact that Porter has never operated as favorably as Harlow's report seems to imply, and she cannot explain the apparent Extending Your Knowledge 413 significant improvement. Cambridge Business Publishers Chapter 10 While reviewing Harlow's report, you are provided the following cost and operating data for Standard Costi ... June: Porter has a monthly normal capacity of 11,000 direct labor hours or 8,800 units of product. Standard costs per unit for its only product are direct materials 3 pounds at $9 per pound; direct labor, 1.25 hours at $12 per hour; and variable overhead rate per direct labor hour of $6. During Extending Your Knowledge 414 June, Porter produced 8,000 units of product, using 24,900 pounds of materials costing $8.70 each, 414 Chapter 10 Standard Costing and Variance 10,200 direct labor hours at an average rate of $11.70 each, and incurred variable overhead costs of Analysis @ C ... $63,000 and fixed overhead costs of $184,000. After reviewing Porter's June cost data, you tell Harlow that his cost report contains a classic budgeting error, and you explain how he can remedy it. In response to your suggestion, Harlow revises his report as follows: Total Actual Total Budgeted Costs Costs Variances Direct materials. . $216,630 $216,000 $ 630 U Direct labor . . . . . . . . 119,340 120,000 660 F Variable overhead 63,000 60,000 3,000 U Fixed overhead. . . . . 184,000 184,000 $582,970 $580,000 $2,970 U Harlow's revised report is accompanied by remarks expressing regret at the oversight in the original report. Required In your role as consultant, a. Verify that Harlow's actual cost figures are correct. b. Identify and explain the classic budgeting error that Harlow apparently incorporated into his original cost report. C. Explain why Harlow's revised figures could be considered deficient. d. Further analyze Harlow's revised variances, isolating underlying potential causal factors. How do your analyses indicate bases for concern to management