Question
The Beal Manufacturing Company uses a standard absorption costing job costing system. Manufacturing overhead is allocated to products on the basis of standard direct labor
The Beal Manufacturing Company uses a standard absorption costing job costing system. Manufacturing overhead is allocated to products on the basis of standard direct labor hours. At the beginning of 20xx, Beal adopted the following standards for its manufacturing costs:
Direct materials 3 lb. @ $5 per lb.
Direct labor 5 hr @ $15 per hour
Overhead:
Variable $6 per direct labor hour
Fixed $8 per direct labor hour
The denominator level for total manufacturing overhead per month in 20xx is 40,000 direct labor hours.
Beal’s expected level of sales is 6,000 units at $190 each. Beal’s flexible budget for March 20xx was based on this denominator level.
The records for January indicated the following:
Direct materials purchased 25,000 lb at $5.20 per pound
Direct materials used 23,100 lb
Direct labor 40,100 hours @ $14.60 per hour
Total overhead $600,000 (1/2 is variable; the remainder is fixed)
Actual production 7,800 units
Units sold 5,000 units at $200 per unit
Variances:
Materials price variance = 5000 Unfavorable
Materials usage variance = 1500 Favorable
DL rate variance = 16040 F
DL efficiency variance = 16500 U
Variable overhead spending variance = 59400 U
Variable overhead efficiency variance = 6600 U
Fixed overhead budget variance = 20000 F
Fixed volume variance 8000 U
REQUIRED:
1. Journalize the above transactions for March.
2. For January, determine the 3-way overhead variances and the 2-way overhead variances.
3. Prepare pro forma income statements (three, including an actual income statement (assuming contribution margin format), flexible budget income statement, and a static budget income statement.
Step by Step Solution
3.63 Rating (164 Votes )
There are 3 Steps involved in it
Step: 1
1 31xx Cash 125000 Direct Materials Inventory 125000 To record purchase of direct materials 32xx Accounts Receivable 300000 Sales 300000 To record sal...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started