Question
Smith manufactures coffee mugs that it sells to other companies for customizing with their own logos. Smith prepares flexible budgets and uses a standard cost
Smith manufactures coffee mugs that it sells to other companies for customizing with their own logos. Smith prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 59,700 coffee mugs per month.
Direct materials (0.2 Ibs @ $0.25 per Ib) $0.05
Direct labor (3 minutes @ $0.12 per minute) 0.36
Manufacturing overhead:
Variable (3 minutes @ $0.05 per minute) $0.15
Fixed (3 minutes @ $0.14 per minute) $ 0.42 0.57
Total cost per coffee mug $.0.98
Actual cost and production information for july:
a. Actual production and sales were 62, 400 coffee mugs.
b. Actual direct materials usage was 12,000 Ibs., at an actual price of $0.18 per Ib.
c. Actual direct labor usage of 203,000 minutes at a total cost of $28,420.
d. Actual overhead cost was $40,900.
1. Compute the price and quantity variances for direct materials.
2. Compute the rate and efficiency variances for direct labor.
3. Journalize the usage of Direct Materials and the assignment of Direct Labor (including related variances).
4. For manufacturing OH, compute the total variance, the flexible budget variance and the production volume variance.
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