ACC 406 Lecture Notes - Lecture 8: Management Accounting
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Buil Corporation manufactures a single product. The standard cost per unit of product is as follows.
Direct materialsâ2 pounds of plastic at $6 per pound $12
Direct laborâ2 hours at $13 per hour 26
Variable manufacturing overhead 7
Fixed manufacturing overhead 5
Total standard cost per unit $50
The master manufacturing overhead budget for the month based on normal productive capacity of 20,000 direct labor hours (10,000 units) shows total variable costs of $70,000 ($3.50 per labor hour) and total fixed costs of $50,000 ($2.50 per labor hour). Normal productive capacity is 20,000 direct labor hours. Overhead is applied on the basis of direct labor hours. Actual costs for November in producing 9,700 units were as follows.
Direct materials (20,000 pounds) $119,000
Direct labor (19,600 hours) 256,760
Variable overhead 68,800
Fixed overhead 50,000
Total manufacturing costs $494,560
The purchasing department normally buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.
Instructions
(a) Compute all of the materials and labor variances.
(b) Compute the total overhead variance.
(a) Total Materials Variance:
( AQ x AP ) | - | ( SQ x SP ) | = | |
- | = | |||
- | = |
Materials Price Variance:
( AQ x AP ) | - | ( AQ x SP ) | = | |
- | = | |||
- | = |
Total Materials Variance:
( AQ x AP ) | - | ( SQ x SP ) | = | |
- | = | |||
- | = |
Total Labor Variance:
( AH x AR ) | - | ( SH x SR ) | = | |
- | = | |||
- | = |
*9,700 x 2
Labor Price Variance:
( AH x AR ) | - | ( SH x SR ) | = | |
- | = | |||
- | = |
Labor Quantity Variance:
( AH x SR ) | - | ( SH x SR ) | = | |
- | = | |||
- | = |
(b) Total Overhead Variance:
Actual Overhead | - | Overhead Applied | = | |
- | = | |||
- | = |
1. Tommy's Toys produces two types of toys: trains and dolls.Tommy's uses stainless steel to manufacture the trains and plasticto manufacture the dolls. Information regarding the usage of steeland plastic for the past year follows:
Product Names | Steel | Plastic |
Direct materials information | ||
Standard pounds per unit | 2 lb. | 1.0 lb. |
Standard Price (SP) per pound | $3.00 | ? |
Actual Quantity (AQ) used per unit | 3.0 lb. | 3.00 lb. |
Actual Price (AP) paid for material | $1.75 | $2.25 |
Actual Quantity Purchased (AQP) and used | 2,800 lb. | 800 lb. |
Price variance | ? | $1,200 F |
Quantity variance | $900 U | ? |
Flexible budget variance | ? | $412 F |
Number of units produced | 300 | 525 |
What is the direct materials flexible budget variance for steelused to manufacture the trains?
A. $4,400 favorable | |
B. $2,600 unfavorable | |
C. $2,600 favorable | |
D. $4,400 unfavorable |
2. Sparky the Electrician specializes in rewiring historichouses. Sparky recently purchased a new wire-pulling device thatwill decrease the time needed to complete each job and increasetotal revenues. The device will cost $5,577 and will increase netcash flows by $1,690 per year. The new device has a useful life of7 years and a residual value of $0. What is the payback period forthe new wire-pulling device?
A. 3.12 years | |
B. 2.80 years | |
C. 3.48 years | |
D. 3.30 years |
3. Sharon Corporation collects 10% in the second month followingsale, 40% in the month following sale, and 40% of a month's salesin the month of sale. The company has found that 10% of their salesare uncollectible. Budgeted sales for the upcoming four monthsare:
August budgeted sales | $280,000 |
September budgeted sales | $350,000 |
October budgeted sales | $380,000 |
November budgeted sales | $240,000 |
The amount of cash that will be collected in November isbudgeted to be
A. $316,000 | |
B. $96,000 | |
C. $283,000 | |
D. $216,000 |
4. Suppose Whole Foods is considering investing inwarehouse-management software that costs $900,000; has $40,000residual value; and should lead to cash cost savings of $180,000per year for its 5-year life. In calculating the ARR, which of thefollowing figures should be used as the equation's denominator?
A.$220,000 | |||||||||
B. $180,000 | |||||||||
C. $40,000 | |||||||||
D. $900,000 5. All of the following budgets are prepared by merchandisingcompanies except
|
6. The Stallard Corporation manufactures Product X that consumesa large amount of overhead. For the month of October, Stallardproduced 14,200 units of Product X and incurred actual overheadcosts of $269,000. The standard costs developed for Product X byStallard follow:
Standard direct labor hours per unit | 4 |
Standard direct labor rate per hour | $11.00 |
Standard overhead hours per unit | 8 |
Standard overhead rate per hour | $4.80 |
What was the total variable overhead variance for Product X inOctober?
$276,280 favorable | |
$200,840 favorable | |
$276,280 unfavorable | |
$200,840 unfavorable |