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The Clark Company makes a single product and uses standard costing.

Some data concerning this product for the month of May


follow:
 Labor rate variance -- P 7,000 F
 Labor efficiency variance--P12,000 F
 Variable overhead efficiency variance--P 4,000 F
 Number of units produced--10,000
 Standard labor rate per direct labor hour--P12
 Standard variable overhead rate per direct labor hour--P 4
 Actual labor hours used--14,000
 Actual variable manufacturing overhead costs--P58,290

1. The variable overhead spending variance for May was _____.


2. The actual direct labor rate for May in pesos per hour was ____.
3. The total standard cost for direct labor for May was ______.
4. The total standard cost for variable overhead for May was ___.
5. The standard hours allowed to make one unit of finished product are _____.

Surgical Supply manufactures latex surgical gloves. It takes 0.85 square feet of latex to manufacture a pair of gloves. The standard
price for material is P0.80 per square foot. Most processing is done by machine; the only labor required is for operators, who are
paid P25 per hour. The machines can produce 400 pairs of gloves per hour.

During one week in May, Surgical produced 30,000 pairs of gloves and experienced a P1,500 unfavorable material quantity
variance. The company had purchased 1,500 more square feet of material than it used in production that week, producing an
unfavorable price variance of P570. Based on 77 total actual labor hours to produce the gloves, a P104 favorable total labor
variance was generated. Determine the following amounts:

1. Standard quantity of material 5. Actual quantity of material used


2. Actual quantity of material purchased 6. Actual price of material purchased
3. Standard hours allowed for production 7. Labor efficiency variance
4. Labor rate variance 8. Actual labor rate

A manufacturer of radios purchases components from subcontractors for assembly into complete radios. Each radio
requires three units each of Part X, which has a standard cost of P2.90 per unit. During June, the company had the
following experience with respect to Part X: Beginning Inventory – 3,000 at a total cost of P8,850, Purchases of 12,000 for
a total cost of P36,000, consumed 11,000 in manufacturing 3,000 radios.
1. Prepare the entry to record purchases using method 3.
2. Prepare the journal entry to record issuance using method 2.
3. Prepare the journal entry to record issuance using method 3.
The Jurcevich Corporation manufactures and sells a single product. A
standard cost system is used by the company. The standard factory
overhead cost for a unit of product is as follows:

Variable overhead
(1.5 hours @ P3 per hour) P4.50
Fixed overhead
 1.50
(1.5 hours @ P1 per hour)
Total standard cost per unit P6.00

The overhead cost per unit was calculated for the year based on a
60,000 unit volume as follows:

Variable factory overhead cost:


   Indirect labor (30,000 hours @ P8) P240,000
   Factory supplies (60,000 gallons of oil
@ P.80 per gallon) 48,000
   Allocated variable service costs from   
other departments 12,000
   Total variable costs P300,000
Fixed overhead costs:
   Supervision P 28,000
   Depreciation 50,000
   Other fixed costs   12,000
  Total fixed overhead costs P 90,000

Total annual factory overhead budget for


60,000 units P270,000

The charges to the manufacturing department for April are given


below for the 5,200 units produced:

Indirect labor (2,400 hrs. @ P8.15 per hr.) P19,560


Factory supplies (6,000 gallons @ P.55) 3,300
Allocated variable service department
3,200
costs
Supervision 2,490
Depreciation 3,750
Other fixed costs   1,000
   Total P33,300

Assuming Jurcevich uses the three-variance method of analyzing


factory overhead, calculate the following variances from standard
cost:
(12) Factory overhead spending variance
(13) Factory overhead variable efficiency variance
(14) Factory overhead volume variance
Determination of standard and actual data
The production records of Know It All (KIA) Company for the month of June shows the following:
Total Manufacturing Cost Variance P3,840 U Price Variance 1,600 U
Total Material Cost Variance 440 U Total Labor Cost Variance 4,200 F
Rate variance 8,400 F
Other Data:
 The company paid P0.10 more than the standard price.
 Two pieces of materials are required per unit of product.
 An overabsorbed capacity of 200 units of product was noted when actual production was
compared with the normal volume of 8,000 units.
 Payroll showed total labor cost of P168,000.
 Workers are usually paid at an average of P4.20, though the records showed that the
company paid less than this during the month.
 Standard overhead rate amounts to P5 per direct labor hours, 40% of which is fixed.
Required:
1) Actual units produced in June.
2) Actual quantity of materials used for production.
3) Standard and actual price of materials per piece.
4) Total standard direct labor hours that should have been used for actual production.
5) Actual labor rate paid to factory workers during the month.
6) Actual factory overhead cost incurred in June.
7) The budgeted fixed overhead based on normal production.
8) 3 variance analysis for overhead.
Problem 1: You have recently accepted a position with Vitex, Inc., the manufacturer of a popular consumer product. During your first week on the job, the vice president has
been favorably impressed with your work. She has been so impressed, in fact, that yesterday she called you into her office and asked you to attend the executive committee
meeting this morning for the purpose of leading a discussion on the variances reported for last period. Anxious to favorably impress the executive committee, you took the
variances and supporting data home last night to study.
On your way to work this morning, the papers were laying on the seat of your new, red convertible. As you were crossing a bridge on the highway, a sudden gust of wind
caught the papers and blew them over the edge of the bridge and into the stream below. You managed to retrieve only one page, which contains the following information:
STANDARD COST CARD
Direct materials, 6 pounds at P3 per pound .................................................................... P18.00
Direct labor, 0.8 direct labor-hours at P15 per direct labor-hour ..................................... P12.00
Variable manufacturing overhead, 0.8 direct labor-hours at P3 per direct labor-hour ..... P2.40
Total Variances Reported
Standard Price Quantity or
Cost* or Rate Efficiency
Direct materials .................................... P405,000 P6,900 F P9,000 U
Direct labor .......................................... P270,000 P14,550 U P21,000 U
Variable manufacturing overhead ........ P54,000 P1,300 F P ? U
*Applied to Work in Process during the period.
You recall that manufacturing overhead cost is applied to production on the basis of direct labor-hours and that all of the materials purchased during the period were used in
production. Work in process inventories are insignificant and can be ignored.
It is now 8:30 A.M. The executive committee meeting starts in just one hour; you realize that to avoid looking like a bungling fool you must somehow generate the necessary
“backup” data for the variances before the meeting begins. Without backup data, it will be impossible to lead the discussion or answer any questions.
1. How many units were produced last period?
2. How many pounds of direct material were purchased and used in production?
3. What was the actual cost per pound of material?
4. How many actual direct labor-hours were worked during the period?
5. What was the actual rate paid per direct labor-hour?
6. How much actual variable manufacturing overhead cost was incurred during the period?
Problem 2: “Wonderful! Not only did our salespeople do a good job in meeting the sales budget this year, but our production people did a good job in controlling costs as well,”
said Kim Clark, president of Martell Company. “Our P18,300 overall manufacturing cost variance is only 1.2% of the P1,536,000 standard cost of products made during the
year. That’s well within the 3% parameter set by management for acceptable variances. It looks like everyone will be in line for a bonus this year.” The company produces and
sells a single product. The standard cost card for the product follows:
Standard Cost Card—per Unit of Product
Direct materials, 2 feet at P8.45 per foot ...................................................................... P 16.90
Direct labor, 1.4 direct labor hours at P16 per direct labor-hour ................................... 22.40
Variable overhead, 1.4 direct labor-hours at P2.50 per direct labor-hour ..................... 3.50
Fixed overhead, 1.4 direct labor-hours at P6 per direct labor-hour .............................. 8.40
The following additional information is available for the year just completed:
a. A total of 64,000 feet of material was purchased during the year at a cost of P8.55 per foot. There were no beginning or ending inventories for the year.
b. The company worked 43,500 direct labor-hours during the year at a direct labor cost of P15.80 per hour.
c. Overhead is applied to products on the basis of standard direct labor-hours budgeted at 35,000 direct labor hours. Data relating to manufacturing overhead costs follow:
Actual variable overhead costs incurred ................................................................... P108,000
Actual fixed overhead costs incurred ........................................................................ P211,800
1. Compute the direct materials price and quantity variances for the year.
2. Compute the direct labor rate and efficiency variances for the year.
3. For manufacturing overhead compute:
a. The variable overhead rate/spending and efficiency variances for the year.
b. The fixed overhead budget and volume variances for the year.
c. Controllable variance
4. Total the variances you have computed, and compare the net amount with the P18,300 mentioned by the president. Do you agree that bonuses should be given to
everyone for good cost control during the year? Explain.