121
122
123
118) Grafton Corporation manufactures one product. It does not maintain any beginning or ending
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. Its standard cost per
unit produced is $38.85. During the year, the company produced and sold 28,200 units at a price of
$50.10 per unit and its selling and administrative expenses totaled $120,000. The company does
not have any variable manufacturing overhead costs. It recorded the following variances during
the year:
Materials price variance
$61,670
F
Materials quantity variance
$700
F
Labor rate variance
$8,776
U
Labor efficiency variance
$12,300
F
Fixed manufacturing overhead budget variance
$16,400
F
Fixed manufacturing overhead volume variance
$21,560
U
Required:
Prepare an income statement for the year.
Materials price variance
Materials quantity variance
$700
Labor rate variance
Labor efficiency variance
Fixed manufacturing overhead budget variance
Fixed manufacturing overhead volume variance
Total variance
Sales (28,200 units × $50.10 per unit)
$38.85 per unit)
Total variance adjustments
Cost of goods sold
Gross margin
377,984
Selling and administrative expenses
120,000
Net operating income
125
119) Buchauer 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:
Buchauer Corporation
Balance Sheet
January 1
Assets
Cash
$1,010,000
Raw materials inventory
32,110
Finished goods inventory
65,340
Property, plant, and equipment (net)
526,900
Total assets
$1,634,350
Liabilities and Equity
Retained earnings
$1,634,350
Total liabilities and equity
$1,634,350
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
1.3
pounds
$6.50
per pound
$8.45
Direct labor
0.70
hours
$18.50
per hour
12.95
Fixed manufacturing overhead
0.70
hours
$4.00
per hour
2.80
Total standard cost per unit
$24.20
The company calculated the following variances for the year:
Materials price variance
$12,040
U
Materials quantity variance
$650
U
Labor rate variance
$1,524
F
Labor efficiency variance
$7,400
U
Fixed manufacturing overhead budget variance
$12,800
U
Fixed manufacturing overhead volume variance
$17,360
F
The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing
overhead of $42,000 and budgeted activity of 10,500 hours.
126
During the year, the company completed the following transactions:
a. Purchased 30,100 pounds of raw material at a price of $6.90 per pound.
b. Used 27,660 pounds of the raw material to produce 21,200 units of work in process.
c. Assigned direct labor costs to work in process. The direct labor workers (who were paid in cash)
worked 15,240 hours at an average cost of $18.40 per hour.
d. Applied fixed overhead to the 21,200 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 $54,800. Of this total, -$10,200 related to items such as insurance, utilities, and
indirect labor salaries that were all paid in cash and $65,000 related to depreciation of
manufacturing equipment.
e. Transferred 21,200 units from work in process to finished goods.
f. Sold for cash 22,800 units to customers at a price of $29.70 per unit.
g. Completed and transferred the standard cost associated with the 22,800 units sold from finished
goods to cost of goods sold.
h. Paid $74,000 of selling and administrative expenses.
i. Closed all standard cost variances to cost of goods sold.
127
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.
3. Prepare an income statement for the year.
128
130
131
120) Lusher 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
Standard
Cost
Direct materials
1.5
kilos
$
5.00
per kilos
$
7.50
Direct labor
0.70
hours
$
22.00
per hour
15.40
Fixed manufacturing overhead
0.70
hours
$
5.50
per hour
3.85
Total standard cost per unit
$
26.75
The company calculated the following variances for the year:
Materials price variance
$
30,050
U
Materials quantity variance
$
500
F
Labor rate variance
$
32,436
U
Labor efficiency variance
$
26,400
U
Fixed manufacturing overhead budget variance
$
19,500
F
Fixed manufacturing overhead volume variance
$
7,315
F
The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing
overhead of $134,750 and budgeted activity of 24,500 hours.
During the year, the company completed the following transactions:
a. Purchased 60,100 kilos of raw material at a price of $5.50 per kilo.
b. Used 55,250 kilos of the raw material to produce 36,900 units of work in process.
c. Assigned direct labor costs to work in process. The direct labor workers (who were paid in
cash) worked 27,030 hours at an average cost of $23.20 per hour.
d. Applied fixed overhead to the 36,900 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 $115,250. Of this total, $40,250 related to items such as
insurance, utilities, and indirect labor salaries that were all paid in cash and $75,000 related to
depreciation of manufacturing equipment.
e. Transferred 36,900 units from work in process to finished goods.
d. Sold for cash 39,700 units to customers at a price of $33.60 per unit.
e. Completed and transferred the standard cost associated with the 39,700 units sold from
finished goods to cost of goods sold.
f. Paid $171,000 of selling and administrative expenses.
g. Closed all standard cost variances to cost of goods sold.
132
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
$1,200,000
$42,000
$0
$80,250
$513,600
=
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
$0
$0
$0
$0
$0
$0
$1,835,850
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.
134
135
136
121) Floria 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:
Floria Corporation
Balance Sheet
January 1
Assets
Cash
$1,020,000
Raw materials inventory
31,395
Finished goods inventory
52,535
Property, plant, and equipment (net)
597,100
Total assets
$1,701,030
Liabilities and Equity
Retained earnings
$1,701,030
Total liabilities and equity
$1,701,030
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
2.1
gallons
$6.50
per gallon
$13.65
Direct labor
0.50
hours
$19.50
per hour
9.75
Fixed manufacturing overhead
0.50
hours
$8.50
per hour
4.25
Total standard cost per unit
$27.65
The company calculated the following variances for the year:
Materials price variance
$61,650
F
Materials quantity variance
$650
U
Labor rate variance
$7,275
F
Labor efficiency variance
$17,550
F
Fixed manufacturing overhead budget variance
$11,600
U
Fixed manufacturing overhead volume variance
$17,425
U
The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing
overhead of $148,750 and budgeted activity of 17,500 hours.
137
During the year, the company completed the following transactions:
a. Purchased 68,500 gallons of raw material at a price of $5.60 per gallon.
b. Used 64,990 gallons of the raw material to produce 30,900 units of work in process.
c. Assigned direct labor costs to work in process. The direct labor workers (who were paid in cash)
worked 14,550 hours at an average cost of $19.00 per hour.
d. Applied fixed overhead to the 30,900 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 $160,350. Of this total, $78,350 related to items such as insurance, utilities, and
indirect labor salaries that were all paid in cash and $82,000 related to depreciation of
manufacturing equipment.
e. Transferred 30,900 units from work in process to finished goods.
f. Sold for cash 27,200 units to customers at a price of $33.50 per unit.
g. Completed and transferred the standard cost associated with the 27,200 units sold from finished
goods to cost of goods sold.
h. Paid $79,000 of selling and administrative expenses.
i. Closed all standard cost variances to cost of goods sold.
138
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.
139
