141
122) Millonzi Corporation manufactures one product. It does not maintain any beginning or
ending Work in Process inventories. The company uses a standard cost system in which
inventories are recorded at their standard costs and any variances are closed directly to Cost of
Goods Sold. There is no variable manufacturing overhead. The company’s balance sheet at the
beginning of the year was as follows:
Millonzi Corporation
Balance Sheet
January 1
Assets
Cash
$1,170,000
Raw materials inventory
52,725
Finished goods inventory
81,060
Property, plant, and equipment (net)
601,000
Total assets
$1,904,785
Liabilities and Equity
Retained earnings
$1,904,785
Total liabilities and equity
$1,904,785
The standard cost card for the company’s only product is as follows:
Inputs
Standard
Quantity
or Hours
Standard Price
or Rate
Direct materials
3.7
liters
$9.50
per liter
Direct labor
0.90
hours
$18.50
per hour
Fixed manufacturing overhead
0.90
hours
$17.50
per hour
Total standard cost per unit
The company calculated the following variances for the year:
Materials price variance
$16,800
F
Materials quantity variance
$950
F
Labor rate variance
$5,484
U
Labor efficiency variance
$3,700
F
Fixed manufacturing overhead budget variance
$11,100
F
Fixed manufacturing overhead volume variance
$152,775
U
The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing
overhead of $236,250 and budgeted activity of 13,500 hours.
142
During the year, the company completed the following transactions:
a. Purchased 21,000 liters of raw material at a price of $8.70 per liter.
b. Used 19,510 liters of the raw material to produce 5,300 units of work in process.
c. Assigned direct labor costs to work in process. The direct labor workers (who were paid in cash)
worked 4,570 hours at an average cost of $19.70 per hour.
d. Applied fixed overhead to the 5,300 units in work in process inventory using the predetermined
overhead rate multiplied by the number of direct labor-hours allowed. Actual fixed overhead costs
for the year were $225,150. Of this total, $165,150 related to items such as insurance, utilities, and
indirect labor salaries that were all paid in cash and $60,000 related to depreciation of
manufacturing equipment.
e. Transferred 5,300 units from work in process to finished goods.
f. Sold for cash 5,500 units to customers at a price of $108.90 per unit.
g. Completed and transferred the standard cost associated with the 5,500 units sold from finished
goods to cost of goods sold.
h. Paid $27,000 of selling and administrative expenses.
i. Closed all standard cost variances to cost of goods sold.
143
Required:
1. Enter the beginning balances and record the above transactions in the worksheet that appears
below. Because of the width of the worksheet, it is in two parts. In your text, these two parts would
be joined side-by-side to make one very wide worksheet.
Cash
Raw Materials
Work in
Process
Finished
Goods
PP&E (net)
=
1/1
=
a.
=
b.
=
c.
=
d.
=
e.
=
f.
=
g.
=
h.
=
i.
=
12/31
=
=
Materials
Price
Variance
Materials
Quantity
Variance
Labor Rate
Variance
Labor
Efficiency
Variance
FOH Budget
Variance
FOH
Volume
Variance
Retained
Earnings
1/1
a.
b.
c.
d.
e.
f.
g.
h.
i.
12/31
2. Determine the ending balance (e.g., 12/31 balance) in each account.
144
146
123) Gathman Corporation manufactures one product. It does not maintain any beginning or
ending Work in Process inventories. The company uses a standard cost system in which
inventories are recorded at their standard costs and any variances are closed directly to Cost of
Goods Sold. There is no variable manufacturing overhead. The company’s balance sheet at the
beginning of the year was as follows:
Gathman Corporation
Balance Sheet
January 1
Assets
Cash
$
1,000,000
Raw materials inventory
27,500
Finished goods inventory
72,485
Property, plant, and equipment (net)
784,300
Total assets
$
1,884,285
Liabilities and Equity
Retained earnings
$
1,884,285
Total liabilities and equity
$
1,884,285
The standard cost card for the company’s only product is as follows:
Inputs
Standard
Quantity
or Hours
Standard Price or
Rate
Standard
Cost
Direct materials
2.5
pounds
$
5.00
per pound
$
12.50
Direct labor
0.90
hours
$
22.00
per hour
19.80
Fixed manufacturing overhead
0.90
hours
$
6.50
per hour
5.85
Total standard cost per unit
$
38.15
The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing
overhead of $117,000 and budgeted activity of 18,000 hours.
147
During the year, the company completed the following transactions:
a. Purchased 36,300 pounds of raw material at a price of $4.70 per pound.
b. Used 32,100 pounds of the raw material to produce 12,800 units of work in process.
c. Assigned direct labor costs to work in process. The direct labor workers (who were paid in
cash) worked 12,520 hours at an average cost of $21.00 per hour.
d. Applied fixed overhead to the 12,800 units in work in process inventory using the
predetermined overhead rate multiplied by the number of direct labor-hours allowed. Actual fixed
overhead costs for the year were $132,700. Of this total, $27,700 related to items such as
insurance, utilities, and indirect labor salaries that were all paid in cash and $105,000 related to
depreciation of manufacturing equipment.
e. Transferred 12,800 units from work in process to finished goods.
f. Sold for cash 12,600 units to customers at a price of $52.10 per unit.
g. Completed and transferred the standard cost associated with the 12,600 units sold from
finished goods to cost of goods sold.
h. Paid $73,000 of selling and administrative expenses.
i. Closed all standard cost variances to cost of goods sold.
148
Required:
1. Compute all direct materials, direct labor, and fixed overhead variances for the year.
2. Enter the beginning balances and record the above transactions in the worksheet that appears
below. Because of the width of the worksheet, it is in two parts. In your text, these two parts would
be joined side-by-side to make one very wide worksheet.
Cash
Raw
Materials
Work in
Process
Finished
Goods
PP&E (net)
=
1/1
=
a.
=
b.
=
c.
=
d.
=
e.
=
f.
=
g.
=
h.
=
i.
=
12/31
=
=
Material
Price
Variance
Material
Quantity
Variance
Labor
Rate
Variance
Labor
Effici.
Variance
FOH
Budget
Variance
FOH
Volume
Variance
Retained
Earnings
1/1
a.
b.
c.
d.
e.
f.
g.
h.
i.
12/31
3. Determine the ending balance (e.g., 12/31 balance) in each account.
4. Prepare an income statement for the year.
149
152
153
124) Lanciotti Corporation manufactures one product. It does not maintain any beginning or
ending Work in Process inventories. The company uses a standard cost system in which
inventories are recorded at their standard costs and any variances are closed directly to Cost of
Goods Sold. There is no variable manufacturing overhead. The standard cost card for the
company’s only product is as follows:
Inputs
Standard Quantity
or Hours
Standard Price
or Rate
Direct materials
2.6
pounds
$6.50
per pound
Direct labor
0.80
hours
$20.00
per hour
Fixed manufacturing overhead
0.80
hours
$11.50
per hour
Total standard cost per unit
The company calculated the following variances for the year:
Materials price variance
$44,040
F
Materials quantity variance
$650
F
Labor rate variance
$52,308
U
Labor efficiency variance
$54,000
F
Fixed manufacturing overhead budget variance
$10,200
F
Fixed manufacturing overhead volume variance
$89,240
F
The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing
overhead of $276,000 and budgeted activity of 24,000 hours.
During the year, the company completed the following transactions:
a. Purchased 110,100 pounds of raw material at a price of $6.10 per pound.
b. Used 103,120 pounds of the raw material to produce 39,700 units of work in process.
c. Assigned direct labor costs to work in process. The direct labor workers (who were paid in cash)
worked 29,060 hours at an average cost of $21.80 per hour.
d. Applied fixed overhead to the 39,700 units in work in process inventory using the predetermined
overhead rate multiplied by the number of direct labor-hours allowed. Actual fixed overhead costs
for the year were $265,800. Of this total, $198,800 related to items such as insurance, utilities, and
indirect labor salaries that were all paid in cash and $67,000 related to depreciation of
manufacturing equipment.
e. Transferred 39,700 units from work in process to finished goods.
f. Sold for cash 34,600 units to customers at a price of $50.90 per unit.
g. Completed and transferred the standard cost associated with the 34,600 units sold from finished
goods to cost of goods sold.
h. Paid $150,000 of selling and administrative expenses.
i. Closed all standard cost variances to cost of goods sold.
154
Required:
1. Record the above transactions in the worksheet that appears below. Because of the width of the
worksheet, it is in two parts. In your text, these two parts would be joined side-by-side to make one
very wide worksheet. The beginning balances have been provided for each of the accounts,
including the Property, Plant, and Equipment (net) account which is abbreviated as PP&E (net).
Cash
Raw Materials
Work in
Process
Finished
Goods
PP&E (net)
=
1/1
$1,020,000
$52,390
$0
$84,200
$538,800
=
a.
=
b.
=
c.
=
d.
=
e.
=
f.
=
g.
=
h.
=
i.
=
12/31
=
=
Materials
Price
Variance
Materials
Quantity
Variance
Labor Rate
Variance
Labor
Efficiency
Variance
FOH Budget
Variance
FOH
Volume
Variance
Retained
Earnings
1/1
$0
$0
$0
$0
$0
$0
$1,695,390
a.
b.
c.
d.
e.
f.
g.
h.
i.
12/31
2. Determine the ending balance (e.g., 12/31 balance) in each account.
3. Prepare an income statement for the year.
155
157
158
125) Herriot Corporation manufactures one product. It does not maintain any beginning or ending
Work in Process inventories. The company uses a standard cost system in which inventories are
recorded at their standard costs and any variances are closed directly to Cost of Goods Sold. There
is no variable manufacturing overhead. The standard cost card for the company’s only product is as
follows:
Inputs
Standard Quantity
or Hours
Standard Price
or Rate
Direct materials
3.7
pounds
$7.50
per pound
Direct labor
0.90
hours
$18.50
per hour
Fixed manufacturing overhead
0.90
hours
$19.00
per hour
Total standard cost per unit
The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing
overhead of $598,500 and budgeted activity of 31,500 hours.
During the year, the company applied fixed overhead to the 37,500 units in work in process
inventory using the predetermined overhead rate multiplied by the number of direct labor-hours
allowed. Actual fixed overhead costs for the year were $609,000. Of this total, $549,000 related to
items such as insurance, utilities, and indirect labor salaries that were all paid in cash and $60,000
related to depreciation of manufacturing equipment.
Required:
Completely record the transactions involving fixed overhead, including any variances, in the
worksheet that appears below. Because of the width of the worksheet, it is in two parts. In your
text, these two parts would be joined side-by-side to make one very wide worksheet. The
beginning balances have been provided for each of the accounts, including the Property, Plant, and
Equipment (net) account which is abbreviated as PP&E (net).
Cash
Raw
Materials
Work in
Process
Finished
Goods
PP&E (net)
=
1/1
$1,030,000
$58,275
$0
$86,100
$475,300
=
=
=
Materials
Price
Variance
Materials
Quantity
Variance
Labor Rate
Variance
Labor
Efficiency
Variance
FOH Budget
Variance
FOH Volume
Variance
Retained
Earnings
1/1
$0
$0
$0
$0
$0
$0
$1,649,675
160
126) Obenshain Corporation manufactures one product. The company uses a standard cost system
in which inventories are recorded at their standard costs. The standard cost card for the company’s
only product is as follows:
Inputs
Standard
Quantity
or Hours
Standard Price
or Rate
Standard
Cost
Direct materials
2.7
liters
$9.00
per liter
$24.30
Direct labor
0.80
hours
$21.00
per hour
16.80
Fixed manufacturing overhead
0.80
hours
$16.00
per hour
12.80
Total standard cost per unit
$53.90
During the year, direct labor workers (who were paid in cash) worked 12,880 hours at an average
cost of $20.00 per hour on 17,600 units. These units were started and completed during the year.
Required:
Completely record the direct labor costs, along with any direct labor variances, in the below
worksheet. Because of the width of the worksheet, it is in two parts. In your text, these two parts
would be joined side-by-side to make one very wide worksheet. The beginning balances have been
provided for each of the accounts, including the Property, Plant, and Equipment (net) account
which is abbreviated as PP&E (net).
Cash
Raw
Materials
Work in
Process
Finished
Goods
PP&E (net)
=
1/1
$1,010,000
$34,020
$0
$48,510
$721,000
=
=
=
Materials
Price
Variance
Materials
Quantity
Variance
Labor Rate
Variance
Labor
Efficiency
Variance
FOH Budget
Variance
FOH
Volume
Variance
Retained
Earnings
1/1
$0
$0
$0
$0
$0
$0
$1,813,530