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Standard Costing (38 marks) After graduation from the Business Accounting program at Algonquin college, you proudly accepted a well paying position as a cost accountant
Standard Costing (38 marks) | ||||
After graduation from the Business Accounting program at Algonquin college, you proudly accepted a well paying position as a cost accountant for | ||||
Serenade Manufacturing located in London, Ontario. The following is the standard card for the company's only product: | ||||
Manufacturing Costs | Standard Qty or Hrs | Standard Price or Rate | Standard Cost per Unit | |
Direct materials (metres) | 4.0 | $ 4.00 | $ 16.00 | |
Direct labour (DL Hrs) | 1.5 | $ 10.00 | 15.00 | |
Variable overhead (DL Hrs) | 1.5 | $ 3.00 | 4.50 | |
Fixed overhead (DL Hrs) | 1.5 | $ 7.00 | 10.50 | |
Standard cost per unit | $ 46.00 | |||
Denominator activity level monthly (DL Hrs) | 22,500 | |||
Budgeted Fixed overhead costs monthly | ||||
For the past month of February 2022, the company proudly manufactured and sold | 18,450 | units. Variable and fixed manufacturing | ||
overhead costs are applied to products on the basis of direct labour hours. All raw materials are direct materials, there are no indirect | ||||
materials. Additional actual manufacturing results, provided from the Controller, Emily Palmer, include: | ||||
Metres or Hours | $ | |||
Direct materials purchased (metres) | 70,022 | $ 4.20 | per metre | |
Beginning inventory of direct materials (metres) | 22,100 | |||
Ending inventory of direct materials (metres) | 22,000 | |||
Direct labour | 29,428 | $ 9.75 | per hour | |
Fixed overhead costs | $ 153,435 | |||
Variable overhead costs | $ 90,000 | |||
Required: | ||||
Ms. Palmer has asked you to determine the following results for February 2022: | ||||
1. For direct materials: | ||||
a. Price and quantity variances | ||||
Price Variance | $ 14,004 | U | ||
Quantity Variance | $ (14,712.00) | F | ||
b. Journal entries to record activity | ||||
Journal Entries | ||||
Accounts | Dr | Cr | ||
To record the purchase of raw materials | ||||
To record the usage of raw materials in production | ||||
2. For direct labour: | ||||
a. Rate and efficiency variances | ||||
Rate Variance | ||||
Efficiency Variance | ||||
b. Journal entry to record labour activity | ||||
Journal Entry | ||||
Accounts | Dr | Cr | ||
To record the Direct Labour | ||||
3. Variable overhead spending and efficiency variances | ||||
Spending Variance | ||||
Efficiency Variance | ||||
4. Fixed overhead budget and volume variances | ||||
Budget Variance | ||||
Volume Variance |
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