Crystal Charm Company makes handcrafted silver charms that attach to jewelry such as a necklace or bracelet. Each charm is adorned with two crystals of various colors. Standard costs follow. Standard Standard Price Standard Quantity e. se oz. $28.00 per oz. 3.80 (Rate) Unit Cost Silver $ 8.35 crystal $14.00 1.e5 Crystals Direct labor 1.5e hrs. $17.e0 per hr. 25.50 During the month of January. Crystal Charm made 1.580 charms. The company used 755 ounces of silver (total cost of $21,895) and 4,790 crystals (total cost of $1.580.70). and paid for 2,520 actual direct labor hours (cost of $41,580.00). Required: 1. Calculate Crystal Charm's direct materials variances for silver and crystals for the month of January. 2. Calculate Crystal Charm's direct labor variances for the month of January.
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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- Genuine Spice Inc. began operations on January 1 of the current year. The company produces 8-ounce bottles of hand and body lotion called Eternal Beauty. The lotion is sold wholesale in 12-bottle cases for 100 per case. There is a selling commission of 20 per case. The January direct materials, direct labor, and factory overhead costs are as follows: DIRECT MATERIALS Cost Behavior Units per Case Cost per Unit Direct Materials Cost per Case Cream base Variable 100 ozs. 0.02 2.00 Natural oils Variable 30ozs. 0.30 9.00 Bottle (8-OZ-) Variable 12 bottles 0.50 6.00 17.00 DIRECT LABOR Department Cost Behavior Time per Case Labor Rate per Hour Direct Labor Cost per Case Mixing Variable 20 min. 18.00 6.00 Filling Variable 5 14.40 1.2 25 min. 7.20 FACTORY OVERHEAD Cost Behavior Total Cost Utilities Mixed 600 Facility lease Fixed 14,000 Equipment depreciation Fixed 4,300 Supplies Fixed 660 19,560 Part ABreak-Even Analysis The management of Genuine Spice Inc. wishes to determine the number of cases required to break even per month. The utilities cost, which is part of factory overhead, is a mixed cost. The following information was gathered from the first six months of operation regarding this cost: Month Case Production Utility Total Cost January 500 600 February 800 660 March 1,200 740 April 1,100 720 May 950 690 June 1,025 705 Instructions 1. Determine the fixed and variable portions of the utility cost using the high-low method. 2. Determine the contribution margin per ease. 3. Determine the fixed costs per month, including the utility fixed cost from part (1). 4. Determine the break-even number of cases per month. Part BAugust Budgets During July of the current year, the management of Genuine Spice Inc. asked the controller to prepare August manufacturing and income statement budgets. Demand was expected to be 1,500 cases at 100 per case for August. Inventory planning information is provided as follows: Finished Goods Inventory: Cases Cost Estimated finished goods inventory, August 1 300 12,000 Desired finished goods inventory, August 31 175 7,000 Materials Inventory: Cream Base (ozs.) Oils (ozs.) Bottles (bottles) Estimated materials inventory, August 1 250 290 600 Desired materials inventory, August 31 1,000 360 240 There was negligible work in process inventory assumed for either the beginning or end of the month; thus, none was assumed. In addition, there was no change in tile cost per unit or estimated units per case operating data from January. Instructions 5. Prepare the August production budget. 6. Prepare the August direct materials purchases budget. 7. Prepare the August direct labor budget. Round the hours required for production to the nearest hour. 8. Prepare the August factory overhead budget. 9. Prepare the August budgeted income statement, including selling expenses. Part CAugust Variance Analysis During September of the current year, the controller was asked to perform variance analyses for August. The January operating data provided the standard prices, rates, times, and quantities per case. There were 1,500 actual cases produced during August, which was 250 more cases than planned at the Beginning of the month. Actual data for August were as follows: Actual Direct Materials Price per Unit Actual Direct Materials Quantity per Case Cream base 0.016 per oz. 102 ozs. Natural oils 0.32 per oz. 31 ozs. Bottle (8 oz.) 0.42 per bottle 12.5 bottles Actual Direct Labor Rate Actual Direct Labor Time per Case Mixing 18.20 19.50 min. Filling 14.00 5.60 min. Actual variable overhead 305.00 Normal volume 1,600 cases The prices of the materials were different than .standard due to fluctuations in market prices. The standard quantity of materials used per case was an ideal standard. The Mixing Department used a higher grade labor classification during the month, thus causing the actual labor rale to exceed standard. The Filling Department used a lower grade labor classification during the month, thus causing the actual labor rate to be less titan standard. Instructions 10. Determine and interpret the direct materials price and quantity variances for the three materials. 11. Determine and interpret the direct labor rate and time variances for the two departments. Round hours to the nearest hour. 12. Determine and interpret the factory overhead controllable variance. 13. Determine and interpret the factory overhead volume variance. 14. Why are the standard direct labor and direct materials costs in the calculations for parts (10) and (11) based on the actual 1,500-case production volume rather than the planned 1,250 cases of production used in the budgets for parts (6) and (7)?Orman Company produces neon-colored covers for tablets (e.g., iPads). For last year, Orman reported the following: Last year, Orman produced 89,000 units and sold 90,500 units at 10.50 per unit. Required: 1. Prepare a statement of cost of goods manufactured. 2. Prepare an absorption-costing income statement.Juztine Company produces a single type of necklace being sold for P 25 per unit. The following information was made available: naulit ba toh?? Yung isa operational Unit sales (P 25 per unit) 63,000 Material usage 75,000 pounds Material cost P7.2 per pounds Labor hours 10,000 hours Labor cost P30 per hour What is the financial partial productivity of Direct Labor? 0.840 6.300? 0.117 0.210 None of the above
- Imperial Jewelers is considering a special order for 20 handcrafted gold bracelets to be given as gifts tomembers of a wedding party. The normal selling price of a gold bracelet is $189.95 and its unit productcost is $149.00 as shown below:Direct materials .................................... $ 84.00Direct labor ........................................... 45.00Manufacturing overhead ...................... 20.00Unit product cost .................................. $149.00Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry isproduced in any given period. However, $4.00 of the overhead is variable with respect to the numberof bracelets produced. The customer who is interested in the special bracelet order would like specialfiligree applied to the bracelets. This filigree would require additional materials costing $2.00 perbracelet and would also require acquisition of a special tool costing $250 that would have no otheruse once the special order is…Cayuga Hardwoods produces handcrafted jewelry boxes. A standard-size box requires 8 board feet of hardwood in the finished product. In addition, 2 board feet of scrap lumber are normally left from the production of one box. Hardwood costs $4.00 per board foot, plus $1.50 in transportation charges per board foot.Required: Compute the standard direct-material cost of a jewelry box.Butik Jelita receives a special order from a local agency requesting it to custom made 20 pieces of dresses to be worn in a special event. The owner, Puan Julia labels this special order as Job A27. The following is the information to produce ONE (1) piece of the dress. Items Quantity Price Direct materials: Material A 4 meters RM30 per meter Material B 2 meters RM10 per meter Direct labours: Cutting department 4 hours RM20 per hour Sewing department 6 hours RM12 per hour Machine hours: Cutting department 2 hours Sewing department 5 hours Production overheads: Cutting department Absorbed at RM6.00 per direct labour hour Sewing department Absorbed at RM4.00 per machine hour Other information: The company hires a special sewing machine which cost RM5,000 to fulfil this whole Job A27. The selling and distribution…
- Samson Designers produces a lady’s handbag that normally sells for $120. The company produces 800 units annually but has the capacity to produce 1,100 units. An order from a customer has been received for 200 handbags at $85 each that would not disrupt current operations. Current costs for the handbag are as follows: Direct materials $23.00 Direct labor 45.00 Variable overhead 7.00 Fixed overhead 12.00 Total $87.00 In addition, the customer would like to add a monogram to each bag which would require an additional $4 per bag in additional labor costs. Samson would also have to purchase a piece of equipment to create the monogram which would cost $800. This equipment would not have any other uses. Which statement is true with regard to this situation? Incremental…Coronado, Ltd. manufactures shirts, which it sells to customers for embroidering with various slogans and emblems. The standard cost card for the shirts is as follows. Standard Price Standard Quantity Standard Cost Direct materials $3 per yard 2.00 yards $6.00 Direct labor $14 per DLH 0.75 DLH 10.50 Variable overhead $3.20 per DLH 0.75 DLH 2.40 Fixed overhead $3 per DLH 0.75 DLH 2.25 $21.15 Sandy Robison, operations manager, was reviewing the results for November when he became upset by the unfavorable variances he was seeing. In an attempt to understand what had happened, Sandy asked CFO Suzy Summers for more information. She provided the following overhead budgets, along with the actual results for November.The company purchased 82,400 yards of fabric and used 94,000 yards of fabric during the month. Fabric purchases during the month were made at $2.80 per yard. The direct labor payroll ran…Juztine Company produces a single type of necklace being sold for P 25 per unit. The following information was made available:Unit sales (P 25 per unit) 63,000 Material usage 75,000 pounds Material cost P7.2 per pounds Labor hours 10,000 hours Labor cost P30 per hourWhat is the operational partial productivity of Direct Material? • 0.840 • 6.300 • 0.117 • 0.210 • None of the above
- Customer profitability. Bracelet Delights is a new company that manufactures custom jewelry. Bracelet Delights currently has six customers referenced by customer number: 01, 02, 03, 04, 05, and 06. Besides the costs of making the jewelry, the company has the following activities: Customer orders. The salespeople, designers, and jewelry makers spend time with the customer. The cost-driver rate is $42 per hour spent with a customer. Customer fittings. Before the jewelry piece is completed, the customer may come in to make sure it looks right and fits properly. Cost-driver rate is $30 per hour. Rush orders. Some customers want their jewelry quickly. The cost-driver rate is $90 per rush order. Number of customer return visits. Customers may return jewelry up to 30 days after the pickup of the jewelry to have something refitted or repaired at no charge. The cost-driver rate is $40 per return visit.Imperial Jewelers manufactures and sells a gold bracelet for $403.00. The company’s accounting system says that the unit product cost for this bracelet is $261.00 as shown below: Direct materials $ 149 Direct labor 80 Manufacturing overhead 32 Unit product cost $ 261 The members of a wedding party have approached Imperial Jewelers about buying 22 of these gold bracelets for the discounted price of $363.00 each. The members of the wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $5. Imperial Jewelers would also have to buy a special tool for $454 to apply the filigree to the bracelets. The special tool would have no other use once the special order is completed. To analyze this special order opportunity, Imperial Jewelers has determined that most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period.…Concord, Ltd. manufactures shirts, which it sells to customers for embroidering with various slogans and emblems. The standard cost card for the shirts is as follows. Standard Price Standard Quantity Standard Cost Direct materials $3 per yard 2.00 yards $6.00 Direct labor $14 per DLH 0.75 DLH 10.50 Variable overhead $3.20 per DLH 0.75 DLH 2.40 Fixed overhead $3 per DLH 0.75 DLH 2.25 $21.15 Sandy Robison, operations manager, was reviewing the results for November when he became upset by the unfavorable variances he was seeing. In an attempt to understand what had happened, Sandy asked CFO Suzy Summers for more information. She provided the following overhead budgets, along with the actual results for November.The company purchased 82,100 yards of fabric and used 93,700 yards of fabric during the month. Fabric purchases during the month were made at $2.80 per yard. The direct labor payroll ran…