Question

P11-2A Computevariances, and prepare income statement

Ayala Corporation accumulatesthe following data relative to jobs started and finished during themonth of June 2017.

Cost and Production Data

Actual

Standard

Raw materials unit cost

$2.30

$2.10

Raw materials units used

11,000

10,000

Direct labor payroll

$120,960

$120,000

Direct labor hours worked

14,400

15,000

Manufacturing overheadincurred

$189,500

Manufacturing overheadapplied

$189,000

Machine hours expected to beused at normal capacity

42,500

Budgeted fixed overhead forJune

$55,250

Variable overhead rate permachine hour

$3.00

Fixed overhead rate permachine hour

$1.30

Overhead is applied on thebasis of standard machine hours. Three hours of machine timeare

required for each directlabor hour. The jobs were sold for $400,000. Selling andadministrative

expenses were $40,000. Assumethat the amount of raw materials purchased equaled the amount

used.

Instructions

(a) Compute all of thevariances for (1) direct materials and (2) direct labor.

(b) Compute the total overheadvariance.

(c) Prepare an incomestatement for management. (Ignore income taxes.)

NOTE: Enter a number in cellsrequesting a value; enter either a number or a formula in cellswith a "?" .

(a)(1)	Total Materials Variance:
	(	AQ	X	AP	)	minus	(	SQ	X	SP)	)
	(	Value	X	Value	)	minus	(	Value	X	Value	)
	=	?	minus	?	=	Value
	Materials price variance:
	(	AQ	X	AP	)	minus	(	AQ	X	SP	)
	(	Value	X	Value	)	minus	(	Value	X	Value	)
	=	?	minus	?	=	Value
	Materials quantity variance:
	(	AQ	X	SP	)	minus	(	SQ	X	SP	)
	(	Value	X	Value	)	minus	(	Value	X	Value	)
	=	?	minus	?	=	Value
(a)(2)	Total Labor Variance:
	(	AH	X	AR	)	minus	(	SH	X	SR	)
	(	Value	X	Value	)	minus	(	Value	X	Value	)
	=	?	minus	?	=	Value
	Labor Price variance:
	(	AH	X	AR	)	minus	(	AH	X	SR	)
	(	Value	X	Value	)	minus	(	Value	X	Value	)
	=	?	minus	?	=	Value
	Labor quantity variance:
	(	AH	X	SR	)	minus	(	SH	X	SR	)
	(	Value	X	Value	)	minus	(	Value	X	Value	)
	=	?	minus	?	=	Value
(b)	Total Overhead Variance:
	=	Actual	minus	Overhead
		Overhead		Applied
	=	Value	minus	Value	=	Value
(c )	AYALA CORPORATION
	Income Statement
	For the Month Ended June 30, 2017
	Sales revenue							Value
	Cost of goods sold (at standard)							?
	Gross profit (at standard)							?
	Variances
	Material price					Value
	Materials quantity					Value
	Labor price					Value
	Labor quantity					Value
	Overhead					Value
	Totalvariance - favorable							?
	Gross profit (actual)							?
	Selling and administrative expenses							Value
	Net income							?