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. Construction Department (Basic guitar built from veneered wood.) Finishing Department (Bridge and strings attached; guitar tuned and inspected.) 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 Springsteen's two production departments are as follows: Construction Department: 5 hours of direct labor at $20 per hour Finishing Department: 4 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 560 guitars, and 360 guitars were sold on account for $430 each. 4. The company purchased 6,600 pounds of veneered wood at a price of $12.50 per pound. 5. Actual usage of veneered wood was 5,100 pounds of the wood purchased during July. 6. Enough parts (bridges and strings) to finish 660 guitars were purchased at a cost of $9,060. 7. The Construction Department used 2,650 direct-labor hours. The total direct-labor cost in the Construction Department was $50,350. 8. The Finishing Department used 2,350 direct-labor hours. The total direct-labor cost in that department was $37,600. 9. There were no direct-material variances in the Finishing Department. Problem 10-47 Part 1 Required: 1-a. Prepare a schedule that computes the standard costs of direct material in each production department. 1-b. Prepare a schedule that computes the standard costs of direct labor in each production department. DIRECT MATERIAL Construction Department Finishing Department Standard direct-material cost: Standard quantity Standard price Standard cost per guitar Actual output in July Total standard cost of direct material in July lbs per lb per guitar guitars set per set per guitar guitars Standard direct-labor cost: Standard quantity Standard rate Standard cost per guitar Actual output in July Total standard cost of direct labor in July DIRECT LABOR Construction Department Finishing Department hrs per hour per guitar guitars hrs per hour per guitar guitars 2. Complete the table below that compute the July direct-material and direct-labor variances in the Construction Department and the July direct-labor variances in the Finishing Department. (Refer to Exhibit 10-2, Exhibit 10-3 and Exhibit 10-4 for guidance.) Actual Quantity Actual Material Cost pounds used x x Direct-Material Price and Quantity Variances Projected Material Cost Standard Material Cost Actual Price Actual Quantity Standard Price Standard Quantity x Standard Price x per pound pounds used per pound pounds allowed per pound Direct-material price variance Direct-material variance Direct-material quantity variance Direct-Material Purchase Price Variance Actual Material Cost Actual Quantity pounds purchased Projected Material Cost Actual Price Standard Actual Quantity x Price per pound pounds purchased Direct-material purchase price variance x per pound Actual Hours Actual Labor Cost hours used x Direct-Labor Rate and Efficiency Variances Projected Labor Cost Actual Rate Actual Hours per hour hours used Direct-labor rate variance Direct-labor variance Standard Labor Cost Standard Rate Standard Hours Standard Rate per hour hours allowed per hour Direct-labor efficiency variance Actual Labor Cost Actual Hours hours used x Direct-Labor Rate and Efficiency Variances Projected Labor Cost Actual Rate Actual Hours per hour hours used Direct-labor rate variance x Direct-labor variance Standard Labor Cost Standard Rate Standard Hours per hour hours allowed Direct-labor efficiency variance x x Standard Rate per hour 3. Complete the following cost variance report for July. Springsteen Company investigates all variances greater than $5,000 or 5%. (Use Exhibit 10-5.) (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "O" 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 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 Construction Department Finishing Department Amount Percentage of Standard Cost Variance Investigation Required Amount Percentage of Standard Cost Variance Investigation Required % % % % % % % % % %