Exam 10: Standard Costs and Variances

Arellanes Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold. There is no variable manufacturing overhead. The company's balance sheet at the beginning of the year was as follows: The standard cost card for the company's only product is as follows: The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $198,000 and budgeted activity of 18,000 hours. During the year, the company completed the following transactions: a. Purchased 75,900 kilos of raw material at a price of $6.40 per kilo.b. Used 68,680 kilos of the raw material to produce 25,400 units of work in process.c. Assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 24,160 hours at an average cost of $19.80 per hour.d. Applied fixed overhead to the 25,400 units in work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed. Actual fixed overhead costs for the year were $187,400. Of this total, $95,400 related to items such as insurance, utilities, and indirect labor salaries that were all paid in cash and $92,000 related to depreciation of manufacturing equipment.e. Transferred 25,400 units from work in process to finished goods.f. Sold for cash 24,200 units to customers at a price of $52.80 per unit.g. Completed and transferred the standard cost associated with the 24,200 units sold from finished goods to cost of goods sold.h. Paid $121,000 of selling and administrative expenses.i. Closed all standard cost variances to cost of goods sold. Required:1. Compute all direct materials, direct labor, and fixed overhead variances for the year.2. Enter the beginning balances and record the above transactions in the worksheet that appears below. 3. Determine the ending balance (e.g., 12/31 balance) in each account.4. Prepare an income statement for the year.

Bulluck Corporation makes a product with the following standard costs: The company reported the following results concerning this product in July. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.The variable overhead efficiency variance for July is:

Woodhead Incorporated manufactures one product. It does not maintain any beginning or ending inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold. Its standard cost per unit produced is $37.45. During the year, the company produced and sold 24,400 units at a price of $47.40 per unit and its selling and administrative expenses totaled $92,000. The company does not have any variable manufacturing overhead costs. It recorded the following variances during the year: The net operating income for the year is closest to:

Newbery Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold. There is no variable manufacturing overhead. The fixed manufacturing overhead standards for the company's only product specify 0.60 hours per unit at $9.50 per hour. The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $199,500 and budgeted activity of 21,000 hours. During the year, 44,000 units were started and completed. Actual fixed overhead costs for the year were $216,200.Assume that all transactions are recorded on a worksheet as shown in the text. On the left-hand side of the equals sign in the worksheet are columns for Cash, Raw Materials, Work in Process, Finished Goods, and Property, Plant, and Equipment (net). All of the variance columns are on the right-hand-side of the equals sign along with the column for Retained Earnings.When the fixed manufacturing overhead cost is recorded, which of the following entries will be made?

Dougher Corporation uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold. The standard cost card for the company's only product is as follows: During the year, the company started and completed 26,900 units. Direct labor employees worked 14,250 hours at an average cost of $20.20 per hour.Assume that all transactions are recorded on a worksheet as shown in the text. On the left-hand side of the equals sign in the worksheet are columns for Cash, Raw Materials, Work in Process, Finished Goods, and Property, Plant, and Equipment (net). All of the variance columns are on the right-hand-side of the equals sign along with the column for Retained Earnings.When the direct labor cost is recorded, which of the following entries will be made?

Milar Corporation makes a product with the following standard costs: In January the company produced 3,310 units using13,240 pounds of the direct material and 2,768 direct labor-hours. During the month, the company purchased 14,000 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $54,960 and the actual variable overhead cost was $23,860.The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.The labor rate variance for January is:

Phann Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold. There is no variable manufacturing overhead. The standard cost card for the company's only product is as follows: The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $90,000 and budgeted activity of 7,500 hours.During the year, the company completed the following transactions:a. Purchased 59,000 kilos of raw material at a price of $9.20 per kilo.b. Used 51,340 kilos of the raw material to produce 18,300 units of work in process.c. Assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 8,850 hours at an average cost of $23.70 per hour.d. Applied fixed overhead to the 18,300 units in work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed. Actual fixed overhead costs for the year were $79,400. Of this total, $22,400 related to items such as insurance, utilities, and indirect labor salaries that were all paid in cash and $57,000 related to depreciation of manufacturing equipment.e. Completed and transferred 18,300 units from work in process to finished goods.Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation. When the work in process is completed and transferred to finished goods in transaction (e) above, the Finished Goods inventory account will increase (decrease) by:

Glaab Incorporated has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. The company has reported the following actual results for the product for September: Required: a. Compute the materials price variance for September. b. Compute the materials quantity variance for September. c. Compute the labor rate variance for September. d. Compute the labor efficiency variance for September. e. Compute the variable overhead rate variance for September. f. Compute the variable overhead efficiency variance for September.

Shankland Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold. There is no variable manufacturing overhead. The standard cost card for the company's only product is as follows: The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $67,500 and budgeted activity of 7,500 hours. During the year, 24,600 units were started and completed. Actual fixed overhead costs for the year were $84,800.Assume that all transactions are recorded on a worksheet as shown in the text. On the left-hand side of the equals sign in the worksheet are columns for Cash, Raw Materials, Work in Process, Finished Goods, and Property, Plant, and Equipment (net). All of the variance columns are on the right-hand-side of the equals sign along with the column for Retained Earnings.When applying fixed manufacturing overhead to production, the Work in Process inventory account will increase (decrease) by: