STANDARD VERSUS ACTUAL COST AND QUANTITIES LAB 3 At year end, the T.O.T.E.S. accountant prepares a summary of production and inventory data for the year (Exhibit 3-B) and a partial income statement with the actual balances of selected accounts (Exhibit 3-C). Variances are calculated in order to adjust cost of goods sold and to provide valuable information to the company's managers. Managers analyze factors that contributed to actual costs being different than standard costs. This lab requires students to: 1) Collect standard cost data from prior labs on a Standard Cost Sheet (Exhibit 3-A). 2) Determine the actual manufacturing overhead rate based on actual data. 3) Calculate variances. Step I: Complete the Standard Cost Sheet (Exhibit 3-A) to record standard costs. o Lab 1 Company Overview, Exhibit 2-A. and Exhibit 2-B contain data relative to standard costs Direct labor efficiency standards must be calculated using information in Exhibit 2-A Manufacturing overhead standards per machine-hour appear on Exhibit 2-A. EXHIBIT 3-A: Standard Cost Sheet Direct Materials (Company Overview) Fabric Standard Qty. per tote Standard Cost per yard $3.10 Webbing $ 0.1 Standard DLH Direct Labor (Exhibit 2-A &Company Overview) Cutting per tote Standard Rate per DHL $ Sewing $ Printing 5 Total Manufacturing Overhead (Exhibit 2-4 Total Manufacturing Overhead Standard MH per tote Standard Rate per MH (PDOHR $ 16 T.O.T.ES. CASE STUDY-TRILLIUM At the end of the month, 900 totes were completed and shipped. The remaining 100 totes are complete but have not been shipped to the customer. The cost accountant uses the cost summary data from the Job Cost Card (Exhibit 2-C) to record the flow of costs for Job #2543 on Exhibit 2-D (you can use either the accounts or the columnar method). Do not worry about over- or underapplied overhead at this time. EXHIBIT 2-O: T-accounts to record cost flows for Job #2543 BBS Raw Materials 20,850 WIP 1,500 BBS BBS Finished Goods 2,500 COGS 0 BB EXHIBIT 2-D: Columnar method to record cost flows for Job 2543 Raw Materials WIP Finished Goods Beg Balance $ 20,850 $ 1.500 5 2,500 $ COGS 0 Ending Balance 15 T.O.T.ES CASE STUDY - TRILLIUM Step 2. Calculate Actual Total Hours worked and Achual Manufacturing Overhead Rates information from Exbibitx 3-8 and 3-C Exhibit 3-1 des actual information about purchases, quantities of materials used in production, actual bours worked by cach department and the actual labor rute paid per bour Isht 3-11 sa presents inventory Information for direct materials and finished goods transactions that occurred during the year. Work in process balances are minimal and enn he ignored because TOTES produces totes for customers on a just-in-time basis Actual total manufacturing overhead costs are found on Exhibit 3.C and then transferred to Exhibit 3-8. Students need to calculate the actual manufacturing overhead rate by dividing total manufacturing overhead by actual machine hears used Step 3: Calculate variances using the information from the Standard Cost Sheet (Exhibit 3-A) and Exhibits 1-1 and 3-C. Indicate whether the variance is favorable (F) or unfavorable (U). Determine Total materials variance, total labor variance and total manufacturing overhead variance Note: Formulas and calculations MUST be shown for each of the thirteen (13) variances. Formulas are provided for one material variance and one labor variance Quantities in variance calculations are ALWAYS totals for the activity level Price Variances AKARON"Sendo Quantity Variances (Efficiency) JAG (AP - SP) SP (TAQ-TQ) Standard price por unit formate ALWAYS CALCULATEDI This is acko per hour for Band only For For labor ond price per Sabor bespre materials overhead, unill, Maybe overhead role amount of von o may per driver for For The total diverse have to be MOH) materials quantity The som cold this is always porchosed amounta Fox labor For labor and overhead The toto the QUAN and is the same amount os Vorance overhead quantity od when calcio is the RATE vied the price pending variance this is always the hours for 12 TOTES. CASE STUDY-TRILLIUM EXHIBIT 3-B: Production and mastery Detail for 30XX TOTES Detail of Inventory Transactions and Production Data for 20xx Actual Totes Produced During the Year 515.000 totes Direct Materials - Fabric: Actual Cost per Yand $ 3.65 Beginning Balance Purchases Available Ending Balance Used Yards of Fabric 600 130,000 130.600 800 129,800 Actual Cost per Yand s 0.74 Direct Materials - Webbing Beginning Balance Purchases Available Ending Balance Used Number of Yards 7.000 720,000 777,000 2.000 775.000 Finished Goods Inventory: Totes Beginning Balance 5,000 Totes completed 515.000 Available 520.000 Sold $10.000 Ending Balance 10,000 Direct Labor: Actual Hours Cutting 6.300 Sewing 4.000 Printing 950 Actual Total Direct Labor Hours 11250 Manufacturing Overhead: Actual Amount Spent on MOHONG Actual Machine Hours Actual Manufacturing Overhead Rate decat Actual Rate $ 18.00 per hour S 21.00 per hour 5 22.00 per hour 5,950 per MH 18 T.O.T.ES.CASE STUDY - TRILLIUM EXHIBIT 3- Selected Income Statement Account Balances at Year End 20XX T.O.T.E.S. Selected Income Statement Account Balances at Year End 20XX Actual Amount SALES REVENUES $ 2,550,000 (510,000 ) totes COST OF GOODS SOLD COSTS ACTUAL MANUFACTURING OVERHEAD Company labels $ 4,080 Depreciation Sewing Machines and Cutting Machines $ 7,600 Factory Utilities $ 37,000 Insurance - Plant $ 14,000 Logo Ink $ 27,000 Plant Maintenance Supervisor $ 34,000 Plant Manager $ 70,000 Rent - Plant Building $ 42,000 Repairs & Maintenance 5 26,000 Thread S 52.000 TOTAL MANUFACTURING OVERHEAD COSTS $ 313,680 SELLING, GENERAL AND ADMINISTRATIVE COSTS Administrative Office Supplies $ 3,500 Administrative Stall, e.g. accountant, receptionist, etc. $ 130,000 Administrative Payroll Taxes and Fringe $ 114,000 Advertising, Trade Shows, Travel & Entertainment $ 42.000 Depreciation - Administrative Office Furniture & Equipment $ 2.450 Equipment Lease - Administrative Office $ 5,000 Executive Salaries $ 160,000 Freight and Postage - Administrative $ 2.400 Legal and Professional $ 4,000 Insurance - Liability and Plant S 23,000 Rent - Administrative Building S 12.000 Sales Commissions $ 102,000 Sales Salaries $ 12.000 Shipping $ 42,800 TOTAL SALES, GENERAL AND ADMINISTRATION COSTS $ 655, 150 19 TOTES CASE STUDY - TRILLIUM Variance Calculations FORMULAS MUST BE WRITTEN FOR EACH VARIANCE PRIOR TO CALCULATIONS Sales Price Variance You will need to calculate crual Selling Price from information on Eb 3.C), Reventue Variance 520 FABRIC Materials Price Variance TAO (AP-SP) Materials Quantity Variance 1. Calculate Sendand wantity for Actual Activity (Production) Le TSO Sid Oty per tot actual tote produced 2. Calele wamin Variance SPITATO) Cost Varios WEBRING: Materials Price Variance Materials Quantity Variance 20 me TOTES CASE STUDY. TRILLIUM CUTTING: Labor Rate Variance TANAP-SP) Lahar Efficiency Variance 1. Calculate Standard wantly for Achal Activity Production) Lee TSO Std Oty per tole actual totes produced 2. Calculate wantity Variance (SPXTAQ-750 SEWING: Labor Rate Variance Labor Efficiency Variance Cost Variances PRINTING: Labor Rate Variance Labor Efficiency Variance MANUFACTURING OVERHEAD (total: Spending (Kate) Variance Efficiency Variance 21 TOTES. CASE STUDY. TRILLIUM Calculate Total Variances for Cost of Goods Sold Adjustment (circle U for Unfavorable or F for favorable) Materials Variances: Price - Fabric Sub Quantity - Fabric 5 Price - Webbing SA Quantity - Webbing Total Materials Variance Su UUF U/F UE UF UF Labor Variances Rate - Cutting Efficiency - Cutting Rate - Sewing Efficiency - Sewing Rate - Printing Efficiency-Printing Total Labor Variances 5 5 $ $ $ UF UF UE UE UJE U/E LE Manufacturing Overhead Variances Spending Efficiency Total MOH Variances UF UF 1) Which ONE variance is the most significant indicating the company needs to analyze why it is so different than expected? MOH because it unfourable 2) Do you think the company is using the correct driver for allocating variable manufacturing overhead? Why? No company has more fronte then be 22 O O Plant maintenance supervisor Other administrative staff accountant, receptionist, finished goods warehouse manager) Hourly Employees: o 2 employee(s) in the cutting department o 4 employee(s) in the sewing department o 1 part-time employee who operates the machine that prints logos on the totes. The hourly employees are all considered direct labor employees. Historically, the hourly employees earn an average of $22 per hour, including fringe benefits and payroll taxes. All hourly employees work 40 hours each week, except for the part-time employee who works 20 hours each week. 4 --- T. TOTESC Study Launch Meeting - Zoom andard Friday, February 20, 2001 TOTES Case Study - 5 T.O.T.E.S. CASE STUDY - HYACINTH MATERIALS Each grocery bag requires 1/4 yard of 60" wide fabric and 1-1/2 yards of webbing. The fabric costs $3.60 per yard. Webbing costs $0.72 per yard. Thread is purchased in 500-yard spools and is considered an indirect material. After the tots pass quality control they are silk- screened with a customer's logo and the T.O.T.E.S. label is attached. Both the logo ink and the company labels are indirect materials. MANUFACTURING OVERHEAD T.O.T.E.S. allocates manufacturing overhead using a plantwide overhead rate based on machine hours in the cutting department. The cutting machines operate 95% of the hours worked by the cutting department employees. The plant operates 50 weeks per year. STANDARD VERSUS ACTUAL COST AND QUANTITIES LAB 3 At year end, the T.O.T.E.S. accountant prepares a summary of production and inventory data for the year (Exhibit 3-B) and a partial income statement with the actual balances of selected accounts (Exhibit 3-C). Variances are calculated in order to adjust cost of goods sold and to provide valuable information to the company's managers. Managers analyze factors that contributed to actual costs being different than standard costs. This lab requires students to: 1) Collect standard cost data from prior labs on a Standard Cost Sheet (Exhibit 3-A). 2) Determine the actual manufacturing overhead rate based on actual data. 3) Calculate variances. Step I: Complete the Standard Cost Sheet (Exhibit 3-A) to record standard costs. o Lab 1 Company Overview, Exhibit 2-A. and Exhibit 2-B contain data relative to standard costs Direct labor efficiency standards must be calculated using information in Exhibit 2-A Manufacturing overhead standards per machine-hour appear on Exhibit 2-A. EXHIBIT 3-A: Standard Cost Sheet Direct Materials (Company Overview) Fabric Standard Qty. per tote Standard Cost per yard $3.10 Webbing $ 0.1 Standard DLH Direct Labor (Exhibit 2-A &Company Overview) Cutting per tote Standard Rate per DHL $ Sewing $ Printing 5 Total Manufacturing Overhead (Exhibit 2-4 Total Manufacturing Overhead Standard MH per tote Standard Rate per MH (PDOHR $ 16 T.O.T.ES. CASE STUDY-TRILLIUM At the end of the month, 900 totes were completed and shipped. The remaining 100 totes are complete but have not been shipped to the customer. The cost accountant uses the cost summary data from the Job Cost Card (Exhibit 2-C) to record the flow of costs for Job #2543 on Exhibit 2-D (you can use either the accounts or the columnar method). Do not worry about over- or underapplied overhead at this time. EXHIBIT 2-O: T-accounts to record cost flows for Job #2543 BBS Raw Materials 20,850 WIP 1,500 BBS BBS Finished Goods 2,500 COGS 0 BB EXHIBIT 2-D: Columnar method to record cost flows for Job 2543 Raw Materials WIP Finished Goods Beg Balance $ 20,850 $ 1.500 5 2,500 $ COGS 0 Ending Balance 15 T.O.T.ES CASE STUDY - TRILLIUM Step 2. Calculate Actual Total Hours worked and Achual Manufacturing Overhead Rates information from Exbibitx 3-8 and 3-C Exhibit 3-1 des actual information about purchases, quantities of materials used in production, actual bours worked by cach department and the actual labor rute paid per bour Isht 3-11 sa presents inventory Information for direct materials and finished goods transactions that occurred during the year. Work in process balances are minimal and enn he ignored because TOTES produces totes for customers on a just-in-time basis Actual total manufacturing overhead costs are found on Exhibit 3.C and then transferred to Exhibit 3-8. Students need to calculate the actual manufacturing overhead rate by dividing total manufacturing overhead by actual machine hears used Step 3: Calculate variances using the information from the Standard Cost Sheet (Exhibit 3-A) and Exhibits 1-1 and 3-C. Indicate whether the variance is favorable (F) or unfavorable (U). Determine Total materials variance, total labor variance and total manufacturing overhead variance Note: Formulas and calculations MUST be shown for each of the thirteen (13) variances. Formulas are provided for one material variance and one labor variance Quantities in variance calculations are ALWAYS totals for the activity level Price Variances AKARON"Sendo Quantity Variances (Efficiency) JAG (AP - SP) SP (TAQ-TQ) Standard price por unit formate ALWAYS CALCULATEDI This is acko per hour for Band only For For labor ond price per Sabor bespre materials overhead, unill, Maybe overhead role amount of von o may per driver for For The total diverse have to be MOH) materials quantity The som cold this is always porchosed amounta Fox labor For labor and overhead The toto the QUAN and is the same amount os Vorance overhead quantity od when calcio is the RATE vied the price pending variance this is always the hours for 12 TOTES. CASE STUDY-TRILLIUM EXHIBIT 3-B: Production and mastery Detail for 30XX TOTES Detail of Inventory Transactions and Production Data for 20xx Actual Totes Produced During the Year 515.000 totes Direct Materials - Fabric: Actual Cost per Yand $ 3.65 Beginning Balance Purchases Available Ending Balance Used Yards of Fabric 600 130,000 130.600 800 129,800 Actual Cost per Yand s 0.74 Direct Materials - Webbing Beginning Balance Purchases Available Ending Balance Used Number of Yards 7.000 720,000 777,000 2.000 775.000 Finished Goods Inventory: Totes Beginning Balance 5,000 Totes completed 515.000 Available 520.000 Sold $10.000 Ending Balance 10,000 Direct Labor: Actual Hours Cutting 6.300 Sewing 4.000 Printing 950 Actual Total Direct Labor Hours 11250 Manufacturing Overhead: Actual Amount Spent on MOHONG Actual Machine Hours Actual Manufacturing Overhead Rate decat Actual Rate $ 18.00 per hour S 21.00 per hour 5 22.00 per hour 5,950 per MH 18 T.O.T.ES.CASE STUDY - TRILLIUM EXHIBIT 3- Selected Income Statement Account Balances at Year End 20XX T.O.T.E.S. Selected Income Statement Account Balances at Year End 20XX Actual Amount SALES REVENUES $ 2,550,000 (510,000 ) totes COST OF GOODS SOLD COSTS ACTUAL MANUFACTURING OVERHEAD Company labels $ 4,080 Depreciation Sewing Machines and Cutting Machines $ 7,600 Factory Utilities $ 37,000 Insurance - Plant $ 14,000 Logo Ink $ 27,000 Plant Maintenance Supervisor $ 34,000 Plant Manager $ 70,000 Rent - Plant Building $ 42,000 Repairs & Maintenance 5 26,000 Thread S 52.000 TOTAL MANUFACTURING OVERHEAD COSTS $ 313,680 SELLING, GENERAL AND ADMINISTRATIVE COSTS Administrative Office Supplies $ 3,500 Administrative Stall, e.g. accountant, receptionist, etc. $ 130,000 Administrative Payroll Taxes and Fringe $ 114,000 Advertising, Trade Shows, Travel & Entertainment $ 42.000 Depreciation - Administrative Office Furniture & Equipment $ 2.450 Equipment Lease - Administrative Office $ 5,000 Executive Salaries $ 160,000 Freight and Postage - Administrative $ 2.400 Legal and Professional $ 4,000 Insurance - Liability and Plant S 23,000 Rent - Administrative Building S 12.000 Sales Commissions $ 102,000 Sales Salaries $ 12.000 Shipping $ 42,800 TOTAL SALES, GENERAL AND ADMINISTRATION COSTS $ 655, 150 19 TOTES CASE STUDY - TRILLIUM Variance Calculations FORMULAS MUST BE WRITTEN FOR EACH VARIANCE PRIOR TO CALCULATIONS Sales Price Variance You will need to calculate crual Selling Price from information on Eb 3.C), Reventue Variance 520 FABRIC Materials Price Variance TAO (AP-SP) Materials Quantity Variance 1. Calculate Sendand wantity for Actual Activity (Production) Le TSO Sid Oty per tot actual tote produced 2. Calele wamin Variance SPITATO) Cost Varios WEBRING: Materials Price Variance Materials Quantity Variance 20 me TOTES CASE STUDY. TRILLIUM CUTTING: Labor Rate Variance TANAP-SP) Lahar Efficiency Variance 1. Calculate Standard wantly for Achal Activity Production) Lee TSO Std Oty per tole actual totes produced 2. Calculate wantity Variance (SPXTAQ-750 SEWING: Labor Rate Variance Labor Efficiency Variance Cost Variances PRINTING: Labor Rate Variance Labor Efficiency Variance MANUFACTURING OVERHEAD (total: Spending (Kate) Variance Efficiency Variance 21 TOTES. CASE STUDY. TRILLIUM Calculate Total Variances for Cost of Goods Sold Adjustment (circle U for Unfavorable or F for favorable) Materials Variances: Price - Fabric Sub Quantity - Fabric 5 Price - Webbing SA Quantity - Webbing Total Materials Variance Su UUF U/F UE UF UF Labor Variances Rate - Cutting Efficiency - Cutting Rate - Sewing Efficiency - Sewing Rate - Printing Efficiency-Printing Total Labor Variances 5 5 $ $ $ UF UF UE UE UJE U/E LE Manufacturing Overhead Variances Spending Efficiency Total MOH Variances UF UF 1) Which ONE variance is the most significant indicating the company needs to analyze why it is so different than expected? MOH because it unfourable 2) Do you think the company is using the correct driver for allocating variable manufacturing overhead? Why? No company has more fronte then be 22 O O Plant maintenance supervisor Other administrative staff accountant, receptionist, finished goods warehouse manager) Hourly Employees: o 2 employee(s) in the cutting department o 4 employee(s) in the sewing department o 1 part-time employee who operates the machine that prints logos on the totes. The hourly employees are all considered direct labor employees. Historically, the hourly employees earn an average of $22 per hour, including fringe benefits and payroll taxes. All hourly employees work 40 hours each week, except for the part-time employee who works 20 hours each week. 4 --- T. TOTESC Study Launch Meeting - Zoom andard Friday, February 20, 2001 TOTES Case Study - 5 T.O.T.E.S. CASE STUDY - HYACINTH MATERIALS Each grocery bag requires 1/4 yard of 60" wide fabric and 1-1/2 yards of webbing. The fabric costs $3.60 per yard. Webbing costs $0.72 per yard. Thread is purchased in 500-yard spools and is considered an indirect material. After the tots pass quality control they are silk- screened with a customer's logo and the T.O.T.E.S. label is attached. Both the logo ink and the company labels are indirect materials. MANUFACTURING OVERHEAD T.O.T.E.S. allocates manufacturing overhead using a plantwide overhead rate based on machine hours in the cutting department. The cutting machines operate 95% of the hours worked by the cutting department employees. The plant operates 50 weeks per year