107. The Kessler Company has the following information pertaining to the month of March:
Required:
Prepare a performance report for March including columns for the (a) actual results, (b) flexible
budget, (c) flexible budget variance, (d) master budget, and (e) sales activity variance.
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108. Eastern Company manufactures special electrical equipment and parts. Eastern employs a
standard cost accounting system with separate standards established for each product.
A special transformer is manufactured in the Transformer Department. Production volume is
measured by direct labor hours in this department and a flexible budget system is used to plan
and control department overhead. Standard costs for the special transformer are determined
annually in September for the coming year. The standard cost of a transformer was computed at
$67.00 as shown below.
Overhead rates were based upon normal and expected monthly capacity, both of which were
4,000 direct labor hours. Practical capacity for this department is 5,000 direct labor hours per
month. Variable overhead costs are expected to vary with the number of direct labor hours
actually used. During October, 800 transformers were produced. This was below expectations
because a work stoppage occurred at the copper supplier and shipments were delayed.
The following costs were incurred in October:
Required:
Compute each of the following variances, showing all your work. Be sure to indicate whether the
variances are favorable or unfavorable.
a. Direct materials price variance for both iron and copper.
b. Direct material efficiency (quantity) variance for both iron and copper.
c. Direct labor rate variance.
d. Direct labor efficiency variance.
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109. Eastern Company manufactures special electrical equipment and parts. Eastern employs a
standard cost accounting system with separate standards established for each product.
A special transformer is manufactured in the Transformer Department. Production volume is
measured by direct labor hours in this department and a flexible budget system is used to plan
and control department overhead. Standard costs for the special transformer are determined
annually in September for the coming year. The standard cost of a transformer was computed at
$67.00 as shown below.
Overhead rates were based upon normal and expected monthly capacity, both of which were
4,000 direct labor hours. Practical capacity for this department is 5,000 direct labor hours per
month. Variable overhead costs are expected to vary with the number of direct labor hours
actually used. During October, 800 transformers were produced. This was below expectations
because a work stoppage occurred at the copper supplier and shipments were delayed.
Required:
Compute each of the following variances, showing all your work. Be sure to indicate whether the
variances are favorable or unfavorable.
a. Variable overhead spending variance.
b. Variable overhead efficiency variance.
c. Fixed overhead spending (budget) variance.
d. Production volume variance.
16–86
110. Western Company manufactures special electrical equipment and parts. Western employs
a standard cost accounting system with separate standards established for each product.
A special transformer is manufactured in the Transformer Department. Production volume is
measured by direct labor hours in this department and a flexible budget system is used to plan
and control department overhead. Standard costs for the special transformer are determined
annually in September for the coming year. The standard cost of a transformer was computed at
$57.00 as shown below.
Overhead rates were based upon normal and expected monthly capacity, both of which were
4,000 direct labor hours. Practical capacity for this department is 5,000 direct labor hours per
month. Variable overhead costs are expected to vary with the number of direct labor hours
actually used.
During October, 900 transformers were produced. This was below expectations because a work
stoppage occurred during contract negotiations with the labor force. Once the contract was
settled, the wage rate was increased to $7.25/hour and overtime was scheduled in an attempt to
catch up to expected production levels.
The following costs were incurred in October:
600 of the 1,400 hours were subject to overtime premium. The total overtime premium is included
in variable overhead in accordance with company accounting practices.
Required:
Compute each of the following variances, showing all your work. Be sure to indicate whether the
variances are favorable or unfavorable.
a. Direct materials price variance.
b. Direct material efficiency (quantity) variance.
c. Direct labor rate variance.
d. Direct labor efficiency variance.
e. Variable overhead spending variance.
f. Variable overhead efficiency variance.
g. Fixed overhead spending (budget) variance.
h. Production volume variance.
111. The XYZ Company uses a standard cost accounting system and estimates production for
the year to be 60,000 units. At this volume, the company’s variable overhead costs are $0.50 per
direct labor hour.
The company’s single product has a standard cost of $30.00 per unit. Included in the $30.00 is
$13.20 for direct materials (3 yards) and $12.00 of direct labor (2 hours). Production information
for the month of March follows:
Required: (Be sure to indicate whether the variances are favorable or unfavorable.)
a. Compute the direct material price variance.
b. Compute the direct material efficiency variance.
c. Compute the direct labor price (rate) variance.
d. Compute the direct labor efficiency variance.
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112. The XYZ Company uses a standard cost accounting system and estimates production for
the year to be 60,000 units. At this volume, the company’s variable overhead costs are $0.50 per
direct labor hour.
The company’s single product has a standard cost of $30.00 per unit. Included in the $30.00 is
$13.20 for direct materials (3 yards) and $12.00 of direct labor (2 hours). Production information
for the month of March follows:
Required: (Be sure to indicate whether the variances are favorable or unfavorable.)
a. Compute the predetermined overhead rate/hr used for the year.
b. Compute the budgeted fixed costs for the month.
c. Compute the variable overhead spending variance.
d. Compute the variable overhead efficiency variance.
e. Compute the fixed overhead spending (budget) variance.
f. Compute the production volume variance.
16–90
113. The XYZ Company uses a standard cost accounting system and estimates production for
the year to be 60,000 units. At this volume, the company’s variable overhead costs are $0.50 per
direct labor hour.
The company’s single product has a standard cost of $30.00 per unit. Included in the $30.00 is
$13.20 for direct materials (3 yards) and $12.00 of direct labor (2 hours). Production information
for the month of March follows:
Required:
Prepare the journal entries to record the following:
a. Purchase and use of direct materials (Assume materials are used as purchased and no
inventory is maintained).
b. Recognition of direct labor.
16–91
114. The XYZ Company uses a standard cost accounting system and estimates production for
the year to be 60,000 units. At this volume, the company’s variable overhead costs are $0.50 per
direct labor hour.
The company’s single product has a standard cost of $30.00 per unit. Included in the $30.00 is
$13.20 for direct materials (3 yards) and $12.00 of direct labor (2 hours). Production information
for the month of March follows:
Required:
Prepare the journal entries to record the following:
a. Incurring actual overhead.
b. Application of overhead to production.
c. Closing of overhead accounts and recognizing variances.
d. Transferring production to finished goods.
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115. The Acme Company uses a standard cost accounting system and estimates production for
the year to be 60,000 units. At this volume, the company’s variable overhead costs are $0.50 per
direct labor hour.
The company’s single product has a standard cost of $30.00 per unit. Included in the $30.00 is
$13.20 for direct materials (3 yards) and $12.00 of direct labor (2 hours). Production information
for the month of March follows:
Required:
Prepare the journal entries to record the following:
a. Purchase and use of direct materials (Assume materials are used as purchased and no
inventory is maintained).
b. Recognition of direct labor.
c. Incurring actual overhead.
d. Application of overhead to production.
e. Closing of overhead accounts and recognizing variances.
f. Transferring production to finished goods.
16–95
116. The condensed flexible budget of the Scott Company for the year is given below:
Direct labor-hours
The company produces a single product that requires 2.5 direct labor-hours to complete. The
direct labor wage rate is $7.50 per hour. Three yards of raw material are required for each unit of
product, at a cost of $5 per yard.
Assume that the company chooses 50,000 direct labor-hours as the denominator level of activity,
but actually worked 48,000 hours during the year, producing 18,500 units.
Actual overhead costs for the year are:
Required: (Be sure to indicate whether the variances are favorable or unfavorable.)
a. Compute the variable overhead price variance and the variable overhead efficiency variance.
b. Compute the fixed overhead spending (budget) variance and the production volume variance.
117. The condensed flexible budget of the Scooter Company for the year is given as $160,000 +
$1.25/direct labor hour. The company produces a single product that requires 2.5 direct labor–
hours to complete.
Assume that the company chooses 100,000 direct labor-hours as the denominator level of activity,
but actually worked 96,000 hours during the year producing 37,000 units.
Actual overhead costs for the year are:
Required: (Be sure to indicate whether the variances are favorable or unfavorable.)
a. Compute the variable overhead price variance and the variable overhead efficiency variance.
b. Compute the fixed overhead spending (budget) variance and the production volume variance.
118. The Standard Company has developed standard overhead costs based upon a capacity of
180,000 direct labor hours:
During April, 85,000 units were scheduled for production; however, only 80,000 units were actually
produced. The following data relate to April:
Actual direct labor cost incurred was $644,000 for 165,000 actual hours of work.
Actual overhead incurred totaled $1,378,000; $518,000 variable and $860,000 fixed.
All inventories are carried at standard cost.
Required: (Be sure to indicate whether the variances are favorable or unfavorable.)
a. Compute the variable overhead price variance.
b. Compute the variable overhead efficiency variance.
119. The Standard Company has developed standard overhead costs based upon a capacity of
180,000 direct labor hours:
During April, 85,000 units were scheduled for production; however, only 80,000 units were actually
produced. The following data relate to April:
Actual direct labor cost incurred was $644,000 for 165,000 actual hours of work.
Actual overhead incurred totaled $1,378,000; $518,000 variable and $860,000 fixed.
All inventories are carried at standard cost.
Required: (Be sure to indicate whether the variances are favorable or unfavorable.)
a. Compute the fixed overhead spending (budget) variance.
b. Compute the production volume variance.
16–99
120. Dash Company adopted a standard cost system several years ago. The standard costs for
the prime costs of its single product are as follows:
The following operating data were taken from the records for November:
Required: (Be sure to indicate whether the variances are favorable or unfavorable.)
a. What is the direct labor price (rate) variance for November?
b. What is the direct labor efficiency variance for November?
c. What is the actual kilograms of material used in the production process during November?
d. Assume the purchasing department is responsible for the material price variance, what is the
actual price paid per kilogram of material during November (assume no increase/decrease in
inventory during the month)?
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121. Dash Company adopted a standard cost system several years ago. The standard costs for
the prime costs of its single product are as follows:
The following operating data were taken from the records for November:
Required:
Prepare the journal entries to record the following:
a. Purchase and use of direct materials (Assume materials are used as purchased and no
inventory is maintained).
b. Recognition of direct labor.