Chapter 10
237. Eider Company has the following information:
Direct Materials: Direct Labor:
Standard Quantity 100,000 Standard Hours 1,000
Actual Quantity 99,500 Actual Hours 1,050
Standard Price $5 Standard Rate $12
Actual Price $4 Actual Rate $13
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A. Determine the materials price variance and whether it is favorable or unfavorable.
B. Determine the materials usage variance and whether it is favorable or unfavorable.
C. Determine the labor rate variance and whether it is favorable or unfavorable.
D. Determine the labor efficiency variance and whether it is favorable or unfavorable.
E. Provide the journal entries to record the purchase of materials, the issuance and usage of materials, and direct
labor variances.
F. Provide the closing entries for the immaterial variances.
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238. The Cat’s Meow manufactures gourmet cat food. During the month, it manufactured 5,000 cans of tuna, using 0.10
hours of direct labor per can at a rate of $8.00 per hour. The materials and labor standards for manufacturing the cans of
tuna are as follows:
Direct materials (1 pound of tuna @ $0.50 per pound) $0.50
Direct materials (1 can @ $0.35) 0.35
Direct labor (0.20 hour @ $7.00) 1.40
The company actually used 4,900 pounds of tuna at a price of $0.65 per pound. It also purchased 5,000 cans at a price of
$0.45 per can.
A. Determine the total materials price variance and whether it is favorable or unfavorable.
B. Determine the materials usage variance for tuna and whether it is favorable or unfavorable.
C. Determine the labor rate variance and whether it is favorable or unfavorable.
D. Determine the labor efficiency variance and whether it is favorable or unfavorable.
E. Make all necessary journal entries to record the purchase of materials, the issuance and usage of materials, and the
direct labor variances.
F. Provide the closing entries.
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239. Grandma’s Attic Company produces soft pillows made from goose down. The company uses a standard cost system
and has set the following standards for materials and labor for each pillow:
Feathers from 5 large white geese (5 geese @ $5) $25
Fabric to make pillow cases (3 yards @ $2) 6
Direct labor (5 hours @ $8) 40
Total prime cost $71
During the month, the company produced 1,000 goose down pillows. Actual geese purchased were 5,100, at $4 per goose.
Actual fabric purchased was 2,900 yards at $2.10 per yard. There were no beginning or ending inventories of geese or
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fabric. Actual direct labor was 5,200 hours at $7.75 per hour.
A. Determine the total materials price variance and whether it is favorable or unfavorable.
B. Determine the total materials usage variance and whether it is favorable or unfavorable.
C. Determine the labor rate variance and whether it is favorable or unfavorable.
D. Determine the labor efficiency variance and whether it is favorable or unfavorable.
E. Make all necessary journal entries to record the purchase of materials, the issuance and usage of materials, and the
direct labor variances.
F. Provide the closing entries.
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240. Stratford Company inspects every steam iron it manufactures for safety issues. The standard labor cost is $12 per
hour. The maintenance standard at the beginning of the first quarter is 20 minutes per iron. Stratford is implementing a
new production process that will aid in reducing any potential electrical defects in the irons. This will decrease the
inspection time to 15 minutes per iron. After the end of the first quarter, the new process had reduced the inspection time
per iron from 20 minutes to 14 minutes.
A. Identify the kaizen and maintenance labor standards in place at the beginning of the first quarter. Express the
standards in both physical and financial terms.
B. Calculate the expected cost reduction and actual cost reduction.
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241. Wiltshire Limited produces woolen blankets and clothing. During Year 1, Wiltshire produced 10,000 items of
blankets and clothing using 4,250 bundles of wool at a price of $10 per bundle.
Standard bundles of wool 4,000
Standard price $20 per bundle
The difference between the actual quantity of materials and the standard quantity of materials is due to waste. At the end
of Year 1, Wiltshire developed a new process that would cut down on the waste by 60%. By the end of Year 2, the
company had actually cut down its waste by 50%.
A. Identify the kaizen and materials standards in place at the beginning of Year 2. Express the standards in both
physical and financial terms.
B. Calculate the expected cost reduction.
C. Calculate the actual cost reduction.
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242. Overland Automotive Company is considering on manufacturing a new brand of car. Given the current product and
process designs, the cost data are:
Direct materials costs (per car) $10,000
Direct labor costs (per car) $ 3,000
Overhead costs (per car) $ 4,000
The company expects the selling price to be $20,000 and has set a target profit of $5,000.
A supplier told Overland that it could purchase a couple of similar components under a different brand name at a lower
price. This would result in cost savings of $2,000 per car. Furthermore, the company found that it could redesign its
manufacturing process to cut down on both inspection labor and worker labor, which would result in cost savings of
$1,000 per car.
A. Calculate Overland’s target cost.
B. Calculate the total costs per car after Overland redesigns its processes and schedules to buy cost-saving
components.
C. Should Overland manufacture the car? Calculate the expected profit after the cost savings are taken into account.
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243. Anderson Company has the following information concerning its direct labor:
Direct Labor:
Standard Hours 6,500
Actual Hours 6,350
Standard Rate $15
Actual Rate $18
A. Determine the labor rate variance and whether it is favorable or unfavorable.
B. Determine the labor efficiency variance and whether it is favorable or unfavorable.
C. Provide the journal entry for the labor variances.
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244. A company provided the following data:
Standard fixed overhead rate (SFOR) $13.00 per direct labor hour
Actual fixed overhead costs $385,800
Standard hours allowed per unit 2
Actual production 15,000 units
Required:
A. Calculate the standard hours allowed for actual production.
B. Calculate the applied fixed overhead
C. Calculate the total fixed overhead variance
245. Littleton Company uses a standard costing system. The following monthly cost functions apply to its manufacturing
overhead items:
Overhead Item Cost Function
Indirect materials $0.80 per DLH
Indirect labor $1.00 per DLH
Utilities $0.40 per DLH
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Insurance $8,000
Depreciation $32,000
Information for the month of October is as follows:
Actual overhead costs incurred:
Indirect materials $20,800
Indirect labor 24,000
Utilities 9,600
Insurance 8,800
Depreciation 32,000
Total $95,200
Actual direct labor hours worked 24,000
Standard direct labor hours allowed for production achieved 27,000
Littleton uses expected capacity to calculate standard overhead rates. The monthly expected capacity is 25,000 hours.
A. Calculate the following standard overhead rates based upon expected capacity:
Variable overhead rate
Fixed overhead rate
Total overhead rate
B. Calculate the following variances:
Variable overhead spending variance
Variable overhead efficiency variance
Fixed overhead spending variance
Fixed overhead volume variance