Standard Cost Summary

Mixing Blending Total

Materials:

4 lb @ $.50 . . . .................. $ 2

1 gal @ $1.00 . .................. $ 1 $ 3

Labor:

1 hr @ $8.00 . . .................. 8

1 hr @ $10.00 . .................. 10 18

Factory overhead:

Per unit . . ......................

1 2 3

$11 $13 $24

Production Report

Mixing Blending

Beginning units in process. ...................... None None

Units finished and transferred . . .................. 6,000 5,000

Ending units in process . . . ...................... 2,000 1,000

Stage of completion. . .......................... 1/2 1/2

Cost Data

Mixing Blending

Direct materials:

30,000 lb @ $.52 . . . ...... $15,600

5,500 gal @ $.95 . . . ...... $ 5,225

Direct labor:

6,800 hr @ $8.00. . . ...... 54,400

5,600 hr @ $10.20 . . ...... 57,120

Factory overhead:

Indirect materials . . ...... $ 500 $1,000

Indirect labor . .......... 2,000 5,000

Other . . . ..............

4,500 7,000 5,000 11,000

$77,000 $73,345

1. a. Calculate net variances for materials, labor, and factory overhead.b. Calculate specific materials and labor variances by department,using the diagram format in Figure 8-4.c. Comment on the possible causes for each of the variances that youcomputed.2. Make all journal entries to record production costs in Work in Processand Finished Goods.3. Determine the balance of ending Work in Process in each department.4. Assume that 4,000 units were sold at $40 each.a. Calculate the gross margin based on standard cost.b. Calculate the gross margin based on actual cost.c. Why does the gross margin at actual cost differ from the gross mar-gin at standard cost.5. As the plant controller, you present the variance report in Item 1 aboveto Paul Crooke, the plant manager. After reading it, Paul states: If wepresent this performance report to corporate with that large unfavorablelabor variance in Blending, nobody in the plant will receive a bonus.Those standard hours of 5,500 are way too tight for this production pro-cess. Fifty-eight hundred hours would be more reasonable, and thatwould result in a favorable labor efficiency variance that would morethan offset the unfavorable labor rate variance. Please redo the variancecalculations using 5,800 hours as the standard. You object, but Paulends the conversation with, That is an order.a. What standards of ethical professional practice would be violated ifyou adhered to Pauls order?b. How would you attempt to resolve this ethical conflict?