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B N alt 3. Shum Company manufactures special electrical equipment and parts. Shum employs a standard cost accounting system with separate standards established for each product. A special transformer is manufactured in the Transformer Department. Production volume is measured by direct labor hours in this department and a flexible budget system is used to plan and control department overhead. Standard costs for the special transformer are determined annually in September for the coming year. The standard cost of a transformer was computed at $67.00 as shown below. Direct materials: Iron 5 sheets @ $2.00 $10.00 Copper 3 spools @ $3.00 Direct labor 9.00 4 hours @ $7.00 28.00 Variable overhead 4 hours @ $3.00 12.00 Fixed overhead 4 hours @ $2.00 8.00 Total $67.00 Overhead rates were based upon normal and expected monthly capacity, both of which were 00 direct labor hours. Practical capacity for this department is 5.000 direct labor hours per month. Variable overhead costs are expected to vary with the number of direct labor hours actually used. During October, 800 transformers were produced. This was below expectations because a work stoppage occurred at the copper supplier and shipments were delayed. Direct materials: Iron: purchased and used 3,900 sheets @ $2.00/sheet Copper: purchased and used 2,200 spools @ $3.10/spool Labor: 3,400 hours, total payroll $24,080 Overhead: $10,000 Variable $8,800 Fixed Required: Compute each of the following variances, showing all your work. Be sure to indicate whether the variances are favorable or unfavorable. (A). Direct materials price variance for iron. (B). Direct material quantity variance for iron. (C). Direct materials price variance for copper (D). Direct material quantity variance for copper. (E). Total direct materials variance. **BONUS QUESTIONS*** Not required, considered for bonus credit only. (1 pt each) (F) Direct labor rate variance (G) Direct labor efficiency (quantity) variance (H) Variable overhead spending variance Σ

B N alt 3. Shum Company manufactures special electrical equipment and parts. Shum employs a standard cost accounting system with separate standards established for each product. A special transformer is manufactured in the Transformer Department. Production volume is measured by direct labor hours in this department and a flexible budget system is used to plan and control department overhead. Standard costs for the special transformer are determined annually in September for the coming year. The standard cost of a transformer was computed at $67.00 as shown below. Direct materials: Iron 5 sheets @ $2.00 $10.00 Copper 3 spools @ $3.00 Direct labor 9.00 4 hours @ $7.00 28.00 Variable overhead 4 hours @ $3.00 12.00 Fixed overhead 4 hours @ $2.00 8.00 Total $67.00 Overhead rates were based upon normal and expected monthly capacity, both of which were 00 direct labor hours. Practical capacity for this department is 5.000 direct labor hours per month. Variable overhead costs are expected to vary with the number of direct labor hours actually used. During October, 800 transformers were produced. This was below expectations because a work stoppage occurred at the copper supplier and shipments were delayed. Direct materials: Iron: purchased and used 3,900 sheets @ $2.00/sheet Copper: purchased and used 2,200 spools @ $3.10/spool Labor: 3,400 hours, total payroll $24,080 Overhead: $10,000 Variable $8,800 Fixed Required: Compute each of the following variances, showing all your work. Be sure to indicate whether the variances are favorable or unfavorable. (A). Direct materials price variance for iron. (B). Direct material quantity variance for iron. (C). Direct materials price variance for copper (D). Direct material quantity variance for copper. (E). Total direct materials variance. **BONUS QUESTIONS*** Not required, considered for bonus credit only. (1 pt each) (F) Direct labor rate variance (G) Direct labor efficiency (quantity) variance (H) Variable overhead spending variance Σ

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 6E: Eclipse Motor Company manufactures two types of specialty electric motors, a commercial motor and a...
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B N alt 3. Shum Company manufactures special electrical equipment and parts. Shum employs a standard cost accounting system with separate standards established for each product. A special transformer is manufactured in the Transformer Department. Production volume is measured by direct labor hours in this department and a flexible budget system is used to plan and control department overhead. Standard costs for the special transformer are determined annually in September for the coming year. The standard cost of a transformer was computed at $67.00 as shown below. Direct materials: Iron 5 sheets @ $2.00 $10.00 Copper 3 spools @ $3.00 Direct labor 9.00 4 hours @ $7.00 28.00 Variable overhead 4 hours @ $3.00 12.00 Fixed overhead 4 hours @ $2.00 8.00 Total $67.00 Overhead rates were based upon normal and expected monthly capacity, both of which were 00 direct labor hours. Practical capacity for this department is 5.000 direct labor hours per month. Variable overhead costs are expected to vary with the number of direct labor hours actually used. During October, 800 transformers were produced. This was below expectations because a work stoppage occurred at the copper supplier and shipments were delayed. Direct materials: Iron: purchased and used 3,900 sheets @ $2.00/sheet Copper: purchased and used 2,200 spools @ $3.10/spool Labor: 3,400 hours, total payroll $24,080 Overhead: $10,000 Variable $8,800 Fixed Required: Compute each of the following variances, showing all your work. Be sure to indicate whether the variances are favorable or unfavorable. (A). Direct materials price variance for iron. (B). Direct material quantity variance for iron. (C). Direct materials price variance for copper (D). Direct material quantity variance for copper. (E). Total direct materials variance. **BONUS QUESTIONS*** Not required, considered for bonus credit only. (1 pt each) (F) Direct labor rate variance (G) Direct labor efficiency (quantity) variance (H) Variable overhead spending variance Σ
Transcribed Image Text:B N alt 3. Shum Company manufactures special electrical equipment and parts. Shum employs a standard cost accounting system with separate standards established for each product. A special transformer is manufactured in the Transformer Department. Production volume is measured by direct labor hours in this department and a flexible budget system is used to plan and control department overhead. Standard costs for the special transformer are determined annually in September for the coming year. The standard cost of a transformer was computed at $67.00 as shown below. Direct materials: Iron 5 sheets @ $2.00 $10.00 Copper 3 spools @ $3.00 Direct labor 9.00 4 hours @ $7.00 28.00 Variable overhead 4 hours @ $3.00 12.00 Fixed overhead 4 hours @ $2.00 8.00 Total $67.00 Overhead rates were based upon normal and expected monthly capacity, both of which were 00 direct labor hours. Practical capacity for this department is 5.000 direct labor hours per month. Variable overhead costs are expected to vary with the number of direct labor hours actually used. During October, 800 transformers were produced. This was below expectations because a work stoppage occurred at the copper supplier and shipments were delayed. Direct materials: Iron: purchased and used 3,900 sheets @ $2.00/sheet Copper: purchased and used 2,200 spools @ $3.10/spool Labor: 3,400 hours, total payroll $24,080 Overhead: $10,000 Variable $8,800 Fixed Required: Compute each of the following variances, showing all your work. Be sure to indicate whether the variances are favorable or unfavorable. (A). Direct materials price variance for iron. (B). Direct material quantity variance for iron. (C). Direct materials price variance for copper (D). Direct material quantity variance for copper. (E). Total direct materials variance. **BONUS QUESTIONS*** Not required, considered for bonus credit only. (1 pt each) (F) Direct labor rate variance (G) Direct labor efficiency (quantity) variance (H) Variable overhead spending variance Σ
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