119. Mulligan Company uses standard costing for direct materials and direct labor. Management would like to
use standard costing for variable and fixed overhead.
The following monthly cost functions were developed for manufacturing overhead items:
Overhead Item
Cost Function
Indirect materials
$1.00 per DLH
Indirect labor
$1.25 per DLH
Utilities
$0.50 per DLH
Insurance
$10,000
Depreciation
$40,000
The cost functions are considered reliable within a relevant range of 20,000 to 40,000 direct labor hours. The company expects to operate at 25,000
direct labor hours per month.
Information for the month of June is as follows:
Actual overhead costs incurred:
Indirect materials
$ 20,000
Indirect labor
30,000
Utilities
12,000
Insurance
11,000
Depreciation
40,000
Total
$113,000
Actual direct labor hours worked:
24,000
Standard direct labor hours allowed for production achieved:
27,000
Required:
a.
Calculate the following standard manufacturing overhead rates based upon expected capacity:
Variable manufacturing overhead
Fixed manufacturing overhead rate
Total manufacturing overhead rate
b.
Calculate the following variances:
Variable overhead spending variance
Variable overhead efficiency variance
Fixed overhead spending variance
Fixed overhead volume variance
c.
Prepare the journal entries to record and apply overhead costs.
120. United Carborundum Company manufactures 100-pound bags of chemicals that have the following unit
standard costs for direct materials and direct labor:
Direct materials (100 lbs. @ $1.00 per lb.)
Direct labor (0.5 hours at $24 per hour)
Total standard direct cost per 100 lb. bag
The following activities were recorded for October:
•
1,000 bags were manufactured.
•
95,000 lbs. of materials costing $76,000 were purchased.
•
102,500 lbs. of materials were used.
•
$12,000 was paid for 475 hours of direct labor.
There were no beginning or ending work-in-process inventories.
Required:
a.
Compute the direct materials variances.
b.
Compute the direct labor variances.
c.
Give possible reasons for the occurrence of each of the preceding variances.
a.
Material price variance:
[$76,000 – (95,000 ´ $1.00)] = $19,000 F
Material usage variance
[102,500 – 1,000(100)] ´ $1.00 = $2,500 U
Labor rate variance
[$12,000 – (475 hrs. ´ $24)] = $600 U
Labor efficiency variance
[(0.5 ´ 1,000) – 475 hrs.]$24 = 600 F
Material usage variance:
Low-quality materials; lower skilled workers; less efficient machines; low employee morale.
Labor rate variance:
Higher skilled workers; longer tenured workers with higher wages.
The firm could be using a more experienced work force than desired.
121. Glenville Company manufactures a single product that has a standard materials cost of $20 (4 units of
materials at $5 per unit), standard direct labor cost of $9 (1 hour per unit), and standard variable overhead cost
of $4 (based on direct labor hours). Fixed overhead is budgeted at $17,000 per month. The following data
pertain to operations for May 2014:
Materials purchased:
8,000 units costing $39,400
Materials used in production of 1,500 units of finished product:
6,200 units of materials
Direct labor used:
1,500 hours costing $15,000
Variable overhead costs incurred:
$5,960
Fixed overhead costs incurred:
$17,500
Required:
a.
Prepare a performance report for Glenville for May using the following headings:
1. Actual Production Costs
2. Flexible Budget Costs
3. Flexible Budget Variances
b.
Compute the following variances (show calculations):
1. Materials usage variance
2. Labor rate variance
3. Labor efficiency variance
4. Variable overhead spending variance
5. Variable overhead efficiency variance
6. Fixed overhead budget variance
c.
Give one possible explanation for each of the six variances computed in part (b).
122. Stammer Company uses three materials in the production of their product. The materials, A, B, and C,
have the following standards:
Material
Standard Mix
Standard Unit Price
Standard Cost
A
5,000 units
$2.00 per unit
$10,000
B
3,000 units
4.00 per unit
$12,000
C
2,000 units
3.00 per unit
$ 6,000
Yield
9,000 units
During April, the following actual production information was provided:
Material
Actual Mix
A
40,000 units
B
20,000 units
C
10,000 units
Yield 60,000 units
Required:
Calculate the materials usage, mix, and yield variances.
Material
(AQ – SM)SP
A
40,000
35,000
5,000
$2.00
$10,000
B
20,000
21,000
(1,000)
4.00
(4,000)
C
10,000
14,000
(4,000)
3.00
(12,000)
$ 6,000 (F)
MUV
= Mix variance + Yield variance
= $6,000 (F) + $9,333 (U) = $3,333 (U)
123. Compare and contrast mix and yield variances.
124. LaPointe Corporation uses two different types of labor to manufacture its product. The types of labor,
Cutting and Setup, have the following standards:
Labor Type
Standard Mix
Standard Unit Price
Standard Cost
Cutting
800 hours
$12.00 per unit
$9,600
Setup
200 hours
8.00 per unit
$1,600
Yield
5,000 units
During January, the following actual production information was provided:
Labor Type
Actual Mix
Cutting
7,000 hours
Setup
3,000 hours
Yield
45,000 units
Required:
Calculate the labor efficiency and mix and yield variances.
Labor Type
(AQ – SM)SP
Setup
3,000
2,000
1,000
8.00
8,000
$ 4,000 (F)
= Mix variance + Yield variance
= $4,000 (F) + $11,200 (U) = $7,200 (U)
125. The following information is provided about three materials utilized in the production of a product:
Material
Standard Mix
Standard Unit Price
Standard Cost
X
2,500 units
$3.00 per unit
$7,500
Y
1,500 units
5.00 per unit
$7,500
Z
1,000 units
4.00 per unit
$4,000
Yield 4,500 units
During May, the following actual production information was provided:
Material
Actual Mix
X
20,000 units
Y
10,000 units
Z
5,000 units
Yield 30,000 units
Required:
Calculate the materials mix and yield variances.
Material
(AQ – SM)SP
X
20,000
17,500
2,500
$3.00
$7,500
Y
10,000
10,500
(500)
5.00
(2,500)
Z
5,000
7,000
(2,000)
4.00
(8,000)
$ 3,000 (F)
126. Organics Corporation uses two different types of labor to manufacture its product. The types of labor,
Cutting and Setup, have the following standards:
Labor Type
Standard Mix
Standard Unit Price
Standard Cost
Cutting
400 hours
$6.00 per unit
$2,400
Setup
100 hours
4.00 per unit
$ 400
Yield 2,500 units
During July, the following actual production information was provided:
Labor Type
Actual Mix
Cutting
3,500 hours
Setup
1,500 hours
Yield 22,500 units
Required:
Calculate the labor mix and yield variances.
Labor Type
(AQ – SM)SP
Setup
1,500
1,000
4.00
2,000
$ 1,000 (F)
127. Production of a product utilizes materials D, E, and F. The following are their standards:
Material
Standard Mix
Standard Unit Price
Standard Cost
D
6,000 units
$1.00 per unit
$6,000
E
4,000 units
2.00 per unit
$8,000
F
2,000 units
1.50 per unit
$ 3,000
Yield 8,000 units
During August, the following actual production information was provided:
Material
Actual Mix
D
37,000 units
E
17,000 units
F
7,000 units
Yield 50,000 units
Required:
Calculate the materials mix, yield, and usage variances.
Material
(AQ – SM)SP
D
37,000
30,500
6,500
$1.00
$6,500
E
17,000
20,333
(3,333)
2.00
(6,666)
F
7,000
10,167
(3,167)
1.50
(4,751)
$ 4,917 (F)
MUV
= Mix variance + Yield variance
= $4,917 (F) + $19,833 (F) = $24,750 (F)
128. Mozambique Industries uses two different types of labor to manufacture its product. The types of labor,
Cutting and Setup, have the following standards:
Labor Type
Standard Mix
Standard Unit Price
Standard Cost
Cutting
200 hours
$12.00 per unit
$2,400
Setup
800 hours
8.00 per unit
$6,400
Yield 4,000 units
During September, the following actual production information was provided:
Labor Type
Actual Mix
Cutting
7,000 hours
Setup
3,000 hours
Yield 42,000 units
Required:
Calculate the labor mix and yield variances.
Labor Type
(AQ – SM)SP
Setup
3,000
8,000
(5,000)
8.00
$(40,000)
$ 20,000 (U)
129. The Stronghold Corporation uses two materials and two types of labor to manufacture a product. The
following are their standards:
Material
Standard Mix
Standard Unit Price
Standard Cost
P
5,500 units
$2.00 per unit
$ 8,000
Q
4,500 units
5.00 per unit
$22,500
Yield
5,000 units
Labor Type
Standard Mix
Standard Unit Price
Standard Cost
Grinding
300 hours
$8.00 per unit
$2,400
Polishing
150 hours
6.00 per unit
$ 900
Yield
6,000 units
During the month of November, the following actual production information was provided:
Material
Actual Mix
P
30,000 units
Q
20,000 units
Yield
30,000 units
Labor Type
Actual Mix
Grinding
4,500 hours
Polishing
2,500 hours
Yield
30,000 units
Required calculations:
a. Material mix variance
b. Material yield variance
c. Labor mix variance
d. Labor yield variance
Material
(AQ – SM)SP
P
30,000
27,500
2,500
$2.00
$ 2,500
Q
20,000
22,500
$(2,500)
5.00
(12,500)
$10,000 (F)