Problem 10: Fa The following are the standard cost data of Paul Corporation for the month of January 2020: a. Each unit of chair requires 0.50 hours of labor time to produce. b. Variable FOH is applied at the rate of P10 per labor hour. c. Fixed FOH is applied at the rate of P5 per labor hour, based on expected annual capacity of 25,000 hours. Actual Production data: Number of chairs produced Actual number of labor hours Variable FOH cost incurred Fixed FOH cost incurred . 52,000 units 26,500 hours P270,000 P140,000 Required: Compute the following: 1. Calculate the variances using 1 way approach 2. Calculate the variances using 2 way approaches 3. Calculate the variances using 3 way approaches 4. Calculate the variances using 4 way approaches

Problem 10: Fa The following are the standard cost data of Paul Corporation for the month of January 2020: a. Each unit of chair requires 0.50 hours of labor time to produce. b. Variable FOH is applied at the rate of P10 per labor hour. c. Fixed FOH is applied at the rate of P5 per labor hour, based on expected annual capacity of 25,000 hours. Actual Production data: Number of chairs produced Actual number of labor hours Variable FOH cost incurred Fixed FOH cost incurred . 52,000 units 26,500 hours P270,000 P140,000 Required: Compute the following: 1. Calculate the variances using 1 way approach 2. Calculate the variances using 2 way approaches 3. Calculate the variances using 3 way approaches 4. Calculate the variances using 4 way approaches

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 18E: Calculating factory overhead: two variances Monrovia Manufacturing Inc. normally produces 10,000...

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Calculating factory overhead: two variances Monrovia Manufacturing Inc. normally produces 10,000 units of product A each month. Each unit requires 4 hours of direct labor, and factory overhead is applied on a direct labor hour basis. Fixed costs and variable costs in factory overhead at the normal capacity are 10 and 5 per unit, respectively. Cost and production data for June follow: a. Calculate the flexible-budget variance. b. Calculate the production-volume variance. c. Was the total factory overhead under- or overapplied? By what amount?
Standard cost summary; materials and labor cost variances Perkins Processors Inc. produces an average of 10,000 units each month. The factory standards are 20,000 hours of direct labor and 10,000 pounds of materials for this volume. The standard cost of direct labor is 9.00 per hour, and the standard cost of materials is 4.00 per pound. The standard factory overhead at this level of production is 20,000. During the current month the production and cost reports reflected the following information: On the basis of this information: 1. Prepare a standard cost summary. 2. Calculate the materials (use the materials purchase price variance) and labor cost variances, and indicate whether they are favorable or unfavorable, using the formulas on pages 421422 and 424.
(Appendix) Calculating factory overhead: four variances Atlanta Adhesives Inc. budgets 15,000 direct labor hours for the year. The total overhead budget is expected to amount to 42,000. The standard cost for a unit of the companys product estimates the variable overhead as follows: The actual data for the period follow: Using the four-variance method, calculate the overhead variances. (Hint: First compute the budgeted fixed overhead rate.)
Direct materials variances Bellingham Company produces a product that requires 2.5 standard pounds per unit. The standard price is 3.75 per pound. If 15,000 units used 36,000 pounds, which were purchased at 4.00 per pound, what is the direct materials (A) price variance, (B) quantity variance, and (C) cost variance?
Refer to Cornerstone Exercise 9.1. Guillermos Oil and Lube Company provided the following information for the production of oil changes during the month of June: Actual number of oil changes performed: 980 Actual number of direct labor hours worked: 386 hours Actual rate paid per direct labor hour: 14.50 Standard rate per direct labor hour: 14.00 Required: 1. Calculate the direct labor rate variance (LRV) and the direct labor efficiency variance (LEV) for June using the formula approach. 2. Calculate the direct labor rate variance (LRV) and the direct labor efficiency variance (LEV) for June using the graphical approach. 3. Calculate the total direct labor variance for oil changes for June. 4. What if the actual wage rate paid in June was 12.40? What impact would that have had on the direct labor rate variance (LRV)? On the direct labor efficiency variance (LEV)?
Calculating factory overhead The normal capacity of a factory is 10,000 units per month. Cost and production data follow: Calculate the amount of factory overhead allowed for the actual volume of production each month and the variance between budgeted and actual overhead for each month.
Refer to the data in Exercise 9.15. Required: 1. Compute overhead variances using a two-variance analysis. 2. Compute overhead variances using a three-variance analysis. 3. Illustrate how the two- and three-variance analyses are related to the four-variance analysis. Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 120,000 units requiring 480,000 direct labor hours. (Practical capacity is 500,000 hours.) Annual budgeted overhead costs total 787,200, of which 556,800 is fixed overhead. A total of 119,400 units using 478,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were 230,600, and actual fixed overhead costs were 556,250. Required: 1. Compute the fixed overhead spending and volume variances. How would you interpret the spending variance? Discuss the possible interpretations of the volume variance. Which is most appropriate for this example? 2. Compute the variable overhead spending and efficiency variances. How is the variable overhead spending variance like the price variances of direct labor and direct materials? How is it different? How is the variable overhead efficiency variance related to the direct labor efficiency variance?
Refer to Cornerstone Exercise 8.13. In March, Nashler Company produced 163,200 units and had the following actual costs: Required: 1. Prepare a performance report for Nashler Company comparing actual costs with the flexible budget for actual units produced. 2. What if Nashler Companys actual direct materials cost were 1,175,040? How would that affect the variance for direct materials? The total cost variance?
(Appendix) Overhead variances—four variance Mobile Manufacturing Inc. manufactures a small electric motor that is a replacement part for the more popular gas furnaces. The standard cost card shows the product requirements as follows: Factory overhead rates are based on normal 100% capacity and the following flexible budgets: The company produced 3,500 units, using 18,375 direct labor hours and incurring the following overhead costs: Required: Calculate the factory overhead: variable-spending, variable-efficiency, fixed-spending, and production-volume variances. Does the net variance represent under- or overapplied factory overhead?
Calculating amount of factory overhead applied to work in process The overhead application rate for a company is 2.50 per unit, made up of 1.00 for fixed overhead and 1.50 for variable overhead. Normal capacity is 10,000 units. In one month, there was an unfavorable flexible budget variance of 200. Actual overhead for the month was 27,000. What was the amount of the budgeted overhead for the actual level of production?
Calculating factory overhead The standard capacity of a factory is 8,000 units per month. Cost and production data follow: Calculate the amount of factory overhead allowed for the actual volume of production each month and the variance between budgeted and actual overhead for each month.
Factory overhead cost variance report Tannin Products Inc. prepared the following factory overhead cost budget for the Trim Department for July of the current year, during which it expected to use 20,000 hours for production: Tannin has available 25,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During July, the Trim Department actually used 22,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for July was as follows: Construct a factory overhead cost variance report for the Trim Department for July.