Concept explainers
Fixed manufacturing
- A. Prepare a variance analysis of fixed
manufacturing overhead cost. Use Figure 8-4 (page 304) as a guide.
Required
- B. Is fixed overhead underallocated or overallocated? By what amount?
- C. Comment on your results. Discuss the variances and explain what may be driving them.
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Chapter 8 Solutions
Horngren's Cost Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText - Access Card Package (16th Edition)
Additional Business Textbook Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
Financial Accounting
Horngren's Accounting (11th Edition)
Financial Accounting, Student Value Edition (4th Edition)
Managerial Accounting (4th Edition)
Intermediate Accounting (2nd Edition)
- At the beginning of the year, Lopez Company had the following standard cost sheet for one of its chemical products: Lopez computes its overhead rates using practical volume, which is 80,000 units. The actual results for the year are as follows: (a) Units produced: 79,600; (b) Direct labor: 158,900 hours at 18.10; (c) FOH: 831,000; and (d) VOH: 112,400. Required: 1. Compute the variable overhead spending and efficiency variances. 2. Compute the fixed overhead spending and volume variances.arrow_forwardUsing variance analysis and interpretation Last year, Wrigley Corp. adopted a standard cost system. Labor standards were set on the basis of time studies and prevailing wage rates. Materials standards were determined from materials specifications and the prices then in effect. On June 30, the end of the current fiscal year, a partial trial balance revealed the following: Standards set at the beginning of the year have remained unchanged. All inventories are priced at standard cost. What conclusions can be drawn from each of the four variances shown in Wrigleys trial balance?arrow_forwardDirect materials and direct labor variance analysis Lenni Clothing Co. manufactures clothing in a small manufacturing facility. Manufacturing has 25 employees. Each employee presently provides 40 hours of productive labor per week. Information about a production week is as follows: Instructions Determine (A) the standard cost per unit for direct materials and direct labor; (B) the price variance, quantity variance, and total direct materials cost variance; and (C) the rate variance, time variance, and total direct labor cost variance.arrow_forward
- Direct materials and direct labor variance analysis Faucet Industries Inc. manufactures faucets in a small manufacturing facility. The faucets are made from zinc. Faucet Industries has 60 employees. Each employee presently provides 36 hours of labor per week. Information about a production week is as follows: Instructions Determine (a) the standard cost per unit for direct materials and direct labor; (h) the price variance, quantity variance, and total direct materials cost variance; and (c) the rate variance, time variance, and total direct labor cost variance.arrow_forwardGeorgia Gasket Co. budgets 8,000 direct labor hours for the year. The total overhead budget is expected to amount to 20,000. 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.)arrow_forwardYohan Company has the following balances in its direct materials and direct labor variance accounts at year-end: Unadjusted Cost of Goods Sold equals 1,500,000, unadjusted Work in Process equals 236,000, and unadjusted Finished Goods equals 180,000. Required: 1. Assume that the ending balances in the variance accounts are immaterial and prepare the journal entries to close them to Cost of Goods Sold. What is the adjusted balance in Cost of Goods Sold after closing out the variances? 2. What if any ending balance in a variance account that exceeds 10,000 is considered material? Close the immaterial variance accounts to Cost of Goods Sold and prorate the material variances among Cost of Goods Sold, Work in Process, and Finished Goods on the basis of prime costs in these accounts. The prime cost in Cost of Goods Sold is 1,050,000, the prime cost in Work in Process is 165,200, and the prime cost in Finished Goods is 126,000. What are the adjusted balances in Work in Process, Finished Goods, and Cost of Goods Sold after closing out all variances? (Round ratios to four significant digits. Round journal entries to the nearest dollar.)arrow_forward
- Warner Company has the following data for the past year: Warner uses the overhead control account to accumulate both actual and applied overhead. Required: 1. Calculate the overhead variance for the year and close it to cost of goods sold. 2. Assume the variance calculated is material. After prorating, close the variances to the appropriate accounts and provide the final ending balances of these accounts. 3. What if the variance is of the opposite sign calculated in Requirement 1? Provide the appropriate adjusting journal entries for Requirements 1 and 2.arrow_forwardSmith Industries uses a cost system that carries direct materials inventory at a standard cost. The controller has established these standards for the cost of one basket (unit): Smith Industries made 3,000 baskets in July and used 15,500 pounds of material to make these units. Smith Industries paid $39,370 for the 15,500 pounds of material. A. What was the direct materials price variance for July? B. What was the direct materials quantity variance for July? C. What is the total direct materials cost variance? D. If Smith Industries used 15,750 pounds to make the baskets, what would be the direct materials quantity variance?arrow_forwardCalculating overhead variances Mills, Inc. is a competitor of Murry, Inc, from Exercise E2348. Mills also uses a standard cost system and provides the following information: Mills allocates manufacturing overhead to production based on standard direct labor hours. Mills reported the following actual results for 2018: actual number of units produced, 1,000; actual variable overhead, $4,000; actual fixed overhead, $3,100; actual direct labor hours, 1,600. Requirements Compute the variable overhead cost and efficiency variance and fixed overhead cost and volume variances. 2 Explain Why the variances are favorable or unfavorable.arrow_forward
- Esquire Clothing allocates fixed manufacturing overhead to each suit using budgeted direct manufacturing labor-hours per suit. Data pertaining to fixed manufacturing overhead costs for June 2017 are budgeted, $62,400, and actual, $63,916. Q. Compute the production-volume variance for June 2017. What inferences can Esquire Clothing draw from this variance?arrow_forwardReview of Chapters 7 and 8, 3-variance analysis. (CPA, adapted) The Beal Manufacturing Company’s costing system has two direct-cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct manufacturing labor-hours (DLH). At the beginning of 2017, Beal adopted the following standards for its manufacturing costs:arrow_forwardGraphs and overhead variances. Best Around, Inc., is a manufacturer of vacuums and uses standard costing. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of budgeted machine-hours. In 2017, budgeted fixed manufacturing overhead cost was $17,000,000. Budgeted variable manufacturing overhead was $10 per machine-hour. The denominator level was 1,000,000 machine-hours.arrow_forward
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