The following are standard costs related to a product of Jacobs, SRL: Inputs: Unit of Input Units per item Price or rate Direct Materials: square feet 80 $22/square foot Direct Labor: direct labor hours 24 $38/direct labor hour Variable Overhead: direct labor hours $49/direct labor hour The company applies variable overhead on the basis of direct labor hours. In April, the following results were reported: Actual output: 506 items Raw Materials used: 45,684 square feet Raw Material purchased: 42,335 square feet Actual direct labor hours: 14,168 hours Actual cost of raw materials purchased: $973,705 Actual direct labor cost: $609,224 Actual variable overhead cost: $665,896 The direct material purchases variance is computed when the materials are purchased. Determine each of the following variances and whether they are favorable or unfavorable: Part 1: Direct Material quantity variance: 114,488 Unfavorable 114,488 Favorable 83,145 Favorable 83, 145 Unfavorable Part 2: Direct Labor rate variance: 70,840 unfavorable 70,840 favorable 87,032 favorable 87,032 unfavorable Part 3: Direct Material price variance: BLANK favorable or unfavorable Part 4: Direct Labor efficiency variance: BLANK favorable or unfavorable

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 2PB: The following product costs are available for Kellee Company on the production of eyeglass frames:...

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The following are standard costs related to a product of Jacobs, SRL:

Inputs:	Unit of Input	Units per item	Price or rate
Direct Materials:	square feet	80	$22/square foot
Direct Labor:	direct labor hours	24	$38/direct labor hour
Variable Overhead:	direct labor hours		$49/direct labor hour

The company applies variable overhead on the basis of direct labor hours.

In April, the following results were reported:

Actual output:	506 items
Raw Materials used:	45,684 square feet
Raw Material purchased:	42,335 square feet
Actual direct labor hours:	14,168 hours
Actual cost of raw materials purchased:	$973,705
Actual direct labor cost:	$609,224
Actual variable overhead cost:	$665,896

The direct material purchases variance is computed when the materials are purchased. Determine each of the following variances and whether they are favorable or unfavorable:

Part 1: Direct Material quantity variance:

114,488 Unfavorable

114,488 Favorable

83,145 Favorable

83, 145 Unfavorable

Part 2: Direct Labor rate variance:

70,840 unfavorable

70,840 favorable

87,032 favorable

87,032 unfavorable

Part 3: Direct Material price variance: BLANK favorable or unfavorable

Part 4: Direct Labor efficiency variance: BLANK favorable or unfavorable

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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