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Pest Away Company manufactures a product effective in controlling beetles. The company uses a standard cost system and a flexible budget. Standard cost ofa gallon is as follows: Direct material: 2 quarts of A 4 quarts of B Total direct material $14 16 $30 Direct labor: 2 hours 16 Manufacturing overhead Total 12 $58 The flexible budget system provides for $50,000 of fixed overhead at normal capacity of 10,000 direct labor hours. Variable overhead is projected at $1 per direct labor hour. Actual results for the period indicated the following: Production: Direct material: 5,000 gallons 12,000 quarts purchased at a cost of $7.20/quart; 10,500 quarts used 20,000 quarts purchased at a cost of $3.90/quart; 19,800 quarts used 9,800 hours worked at a cost of $79,380 Fixed A Direct labor: Overhead: $48,100 21.000 $69.100 Variable Total overhead Required: 1. What is the application rate per direct labor hour, the total overhead cost equation, the standard quantity for each material, and the standard hours? 2. Compute variances: a. Total material price variance b. Total material quantity variance c. Labor rate variance d. Labor efficiency variance e. MOH volume variance f. the following MOH efficiency variance g. MOH spending variance, both fixed and variable

Pest Away Company manufactures a product effective in controlling beetles. The company uses a standard cost system and a flexible budget. Standard cost ofa gallon is as follows: Direct material: 2 quarts of A 4 quarts of B Total direct material $14 16 $30 Direct labor: 2 hours 16 Manufacturing overhead Total 12 $58 The flexible budget system provides for $50,000 of fixed overhead at normal capacity of 10,000 direct labor hours. Variable overhead is projected at $1 per direct labor hour. Actual results for the period indicated the following: Production: Direct material: 5,000 gallons 12,000 quarts purchased at a cost of $7.20/quart; 10,500 quarts used 20,000 quarts purchased at a cost of $3.90/quart; 19,800 quarts used 9,800 hours worked at a cost of $79,380 Fixed A Direct labor: Overhead: $48,100 21.000 $69.100 Variable Total overhead Required: 1. What is the application rate per direct labor hour, the total overhead cost equation, the standard quantity for each material, and the standard hours? 2. Compute variances: a. Total material price variance b. Total material quantity variance c. Labor rate variance d. Labor efficiency variance e. MOH volume variance f. the following MOH efficiency variance g. MOH spending variance, both fixed and variable

Principles of Cost Accounting
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter8: Standard Cost Accounting—materials, Labor, And Factory Overhead
Section: Chapter Questions
Problem 20P: Jillian Manufacturing Inc. manufactures a single product and uses a standard cost system. The...
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Case 2 Pest Away Company manufactures a product effective in controlling beetles. The company uses a standard cost system and a flexible budget. Standard cost of a gallon is as follows: Direct material: 2 quarts of A 4 quarts of B Total direct material $14 16 $30 Direct labor: 2 hours 16 Manufacturing overhead Total 12 $58 The flexible budget system provides for $50,000 of fixed overhead at normal capacity of 10,000 direct labor hours. Variable overhead is projected at $1 per direct labor hour. Actual results for the period indicated the following: Production: Direct 5,000 gallons material: 12,000 quarts purchased at a cost of $7.20/quart; 10,500 quarts used 20,000 quarts purchased at a cost of $3.90/quart; 19,800 quarts used 9,800 hours worked at a cost of $79,380 Fixed A Direct labor: Overhead: $48,100 21.000 $69.100 Variable Total overhead Required: 1. What is the application rate per direct labor hour, the total overhead cost equation, the standard quantity for each material, and the standard hours? 2. Compute variances: a. Total material price variance b. Total material quantity variance c. Labor rate variance d. Labor efficiency variance e. MOH volume variance f. MOH efficiency variance g. MOH spending variance, both fixed and variable the following
Transcribed Image Text:Case 2 Pest Away Company manufactures a product effective in controlling beetles. The company uses a standard cost system and a flexible budget. Standard cost of a gallon is as follows: Direct material: 2 quarts of A 4 quarts of B Total direct material $14 16 $30 Direct labor: 2 hours 16 Manufacturing overhead Total 12 $58 The flexible budget system provides for $50,000 of fixed overhead at normal capacity of 10,000 direct labor hours. Variable overhead is projected at $1 per direct labor hour. Actual results for the period indicated the following: Production: Direct 5,000 gallons material: 12,000 quarts purchased at a cost of $7.20/quart; 10,500 quarts used 20,000 quarts purchased at a cost of $3.90/quart; 19,800 quarts used 9,800 hours worked at a cost of $79,380 Fixed A Direct labor: Overhead: $48,100 21.000 $69.100 Variable Total overhead Required: 1. What is the application rate per direct labor hour, the total overhead cost equation, the standard quantity for each material, and the standard hours? 2. Compute variances: a. Total material price variance b. Total material quantity variance c. Labor rate variance d. Labor efficiency variance e. MOH volume variance f. MOH efficiency variance g. MOH spending variance, both fixed and variable the following
e. earn 12 percent on sales revenue in after-tax income, assuming a 30 percent tax rate.
Transcribed Image Text:e. earn 12 percent on sales revenue in after-tax income, assuming a 30 percent tax rate.
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