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Direct materials (7 lbs. @ $5.40) Direct labor (1.75 hrs. @ $18) Variable overhead (1.75 hrs. @ $4.00) Fixed overhead (1.75 hrs. @ $3.00) Standard unit cost $37.80 31.50 7.00 5.25 $81.55 During the year, Petrillo had the following activity related to valve production: a. Production of valves totaled 20,600 units. b. A total of 135,400 pounds of direct materials was purchased at $5.36 per pound. c. There were 10,000 pounds of direct materials in beginning inventory (carried at $5.40 per pound). There was no ending inventory. d. The company used 36,500 direct labor hours at a total cost of $656,270. e. Actual fixed overhead totaled $110,000. f. Actual variable overhead totaled $168,000. Petrillo produces all of its valves in a single plant. Normal activity is 20,000 units per year. Stand- ard overhead rates are computed based on normal activity measured in standard direct labor hours. Required: 1. Compute the direct materials price and usage variances. 2. Compute the direct labor rate and efficiency variances. 3. Compute overhead variances using a two-variance analysis.

Direct materials (7 lbs. @ $5.40) Direct labor (1.75 hrs. @ $18) Variable overhead (1.75 hrs. @ $4.00) Fixed overhead (1.75 hrs. @ $3.00) Standard unit cost $37.80 31.50 7.00 5.25 $81.55 During the year, Petrillo had the following activity related to valve production: a. Production of valves totaled 20,600 units. b. A total of 135,400 pounds of direct materials was purchased at $5.36 per pound. c. There were 10,000 pounds of direct materials in beginning inventory (carried at $5.40 per pound). There was no ending inventory. d. The company used 36,500 direct labor hours at a total cost of $656,270. e. Actual fixed overhead totaled $110,000. f. Actual variable overhead totaled $168,000. Petrillo produces all of its valves in a single plant. Normal activity is 20,000 units per year. Stand- ard overhead rates are computed based on normal activity measured in standard direct labor hours. Required: 1. Compute the direct materials price and usage variances. 2. Compute the direct labor rate and efficiency variances. 3. Compute overhead variances using a two-variance analysis.

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter10: Standard Costing And Variance Analysis
Section: Chapter Questions
Problem 52E: 10-52 Materials and Labor Variances Refer to the information for Deporte Company above. Required:...
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4 Problem 9.32 Basic Variance Analysis, Revision of Standards, Journal Entries Petrillo Company produces engine parts for large motors. The company uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products (a valve) is as follows:
Transcribed Image Text:4 Problem 9.32 Basic Variance Analysis, Revision of Standards, Journal Entries Petrillo Company produces engine parts for large motors. The company uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products (a valve) is as follows:
Direct materials (7 lbs. @ $5.40) Direct labor (1.75 hrs. @ $18) Variable overhead (1.75 hrs. @ $4.00) Fixed overhead (1.75 hrs. @ $3.00) Standard unit cost $37.80 31.50 7.00 5.25 $81.55 During the year, Petrillo had the following activity related to valve production: a. Production of valves totaled 20,600 units. b. A total of 135,400 pounds of direct materials was purchased at $5.36 per pound. C. There were 10,000 pounds of direct materials in beginning inventory (carried at $5.40 per pound). There was no ending inventory. d. The company used 36,500 direct labor hours at a total cost of $656,270. e. Actual fixed overhead totaled $110,000. f. Actual variable overhead totaled $168,000. Petrillo produces all of its valves in a single plant. Normal activity is 20,000 units per year. Stand- ard overhead rates are computed based on normal activity measured in standard direct labor hours. Required: 1. Compute the direct materials price and usage variances. 2. Compute the direct labor rate and efficiency variances. 3. Compute overhead variances using a two-variance analysis. 4. Compute overhead variances using a four-variance analysis. 5. Assume that the purchasing agent for the valve plant purchased a lower-quality direct mate- rial from a new supplier. Would you recommend that the company continue to use this cheaper direct material? If so, what standards would likely need revision to reflect this deci- sion? Assume that the end product's quality is not significantly affected. 6. Prepare all possible journal entries (assuming a four-variance analysis of overhead variances). in lournal Entries
Transcribed Image Text:Direct materials (7 lbs. @ $5.40) Direct labor (1.75 hrs. @ $18) Variable overhead (1.75 hrs. @ $4.00) Fixed overhead (1.75 hrs. @ $3.00) Standard unit cost $37.80 31.50 7.00 5.25 $81.55 During the year, Petrillo had the following activity related to valve production: a. Production of valves totaled 20,600 units. b. A total of 135,400 pounds of direct materials was purchased at $5.36 per pound. C. There were 10,000 pounds of direct materials in beginning inventory (carried at $5.40 per pound). There was no ending inventory. d. The company used 36,500 direct labor hours at a total cost of $656,270. e. Actual fixed overhead totaled $110,000. f. Actual variable overhead totaled $168,000. Petrillo produces all of its valves in a single plant. Normal activity is 20,000 units per year. Stand- ard overhead rates are computed based on normal activity measured in standard direct labor hours. Required: 1. Compute the direct materials price and usage variances. 2. Compute the direct labor rate and efficiency variances. 3. Compute overhead variances using a two-variance analysis. 4. Compute overhead variances using a four-variance analysis. 5. Assume that the purchasing agent for the valve plant purchased a lower-quality direct mate- rial from a new supplier. Would you recommend that the company continue to use this cheaper direct material? If so, what standards would likely need revision to reflect this deci- sion? Assume that the end product's quality is not significantly affected. 6. Prepare all possible journal entries (assuming a four-variance analysis of overhead variances). in lournal Entries
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