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Standard Costs and Balanced Scorecard
FOR INSTRUCTOR USE ONLY
23 - 41
BE 192
Labor data for making one pound of finished product in Curling Co. are as follows: (1) Price—
hourly wage rate $11.00, payroll taxes $1.80, and fringe benefits $1.20. (2) Quantity—actual
production time 1.1 hours, rest periods and clean up 0.25 hours, and setup and downtime 0.15
hours.
Instructions
Compute the following.
(a) Standard direct labor rate per hour.
(b) Standard direct labor hours per pound.
(c) Standard cost per pound.
BE 193
During March, Patt, Inc. purchases and uses 8,800 pounds of materials costing $35,640 to make
4,000 tiles. Patt’s standard material cost per tile is $8 (2 pounds of material × $4.00).
Instructions
Compute the total, price, and quantity material variances for Patt, Inc. for March.
BE 194
During January, Ajax Co. incurs 1,850 hours of direct labor at an hourly cost of $11.80 in
producing 1,000 units of its finished product. Ajax standard labor cost per unit of output is $22
(2 hours x $11.00).
Instructions
Compute the total, price, and quantity labor variances for Ajax Co. for January.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
FOR INSTRUCTOR USE ONLY
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BE 195
In October, Glazier Inc. reports 42,000 actual direct labor hours, and it incurs $194,000 of
manufacturing overhead costs. Standard hours allowed for the work done is 40,000 hours.
Glazier’s predetermined overhead rate is $5.00 per direct labor hour.
Instructions
Compute the total manufacturing overhead variance.
aBE 196
Overhead data for Glazier Inc. are given in BE 195. In addition, the flexible manufacturing
overhead budget shows that budgeted costs are $3.80 variable per direct labor hour and $60,000
fixed.
Instructions
Compute the manufacturing overhead controllable variance.
aBE 197
Using the data in BE 195 and BE 196, compute the manufacturing overhead volume variance.
Normal capacity was 50,000 direct labor hours.
aBE 198
Jet Industries purchased 6,000 units of raw material on account for $17,600, when the standard
cost was $18,000. Later in the month, Jet Industries issued 5,600 units of raw materials for
production, when the standard units were 5,800.
Instructions
Journalize the transactions for Jet Industries to account for this activity.
Standard Costs and Balanced Scorecard
FOR INSTRUCTOR USE ONLY
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aSolution 198 (5 min.)
aBE 199
Pedra, Inc. incurred direct labor costs of $54,000 for 6,000 hours. The standard labor cost was
$55,200. During the month, Pedra assigned 6,000 direct labor hours costing $54,000 to
production. The standard hours were 6,200.
Instructions
Journalize the transactions for Pedra, Inc. to account for this activity.
aBE 200
Manufacturing overhead data for the production of Product B by North Bank, Inc. are as follows.
Overhead incurred for 69,000 actual direct labor hours worked $206,000
Overhead rate (variable $2.00; fixed $1.00) at normal capacity of
72,000 direct labor hours $3.00
Standard hours allowed for work done 69,000
Instructions
Compute the controllable and volume overhead variances.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
FOR INSTRUCTOR USE ONLY
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aSolution 200 (5 min.)
EXERCISES
Ex 201
Sonic, Inc. is planning to produce 2,500 units of product in 2013. Each unit requires
3 pounds of materials at $6 per pound and a half hour of labor at $16 per hour. The overhead rate
is 75% of direct labor.
Instructions
(a) Compute the budgeted amounts for 2013 for direct materials to be used, direct labor, and
applied overhead.
(b) Compute the standard cost of one unit of product.
Ex. 202
Pane Corp. manufactures and sells a nutrition drink for children. It wants to develop a standard
cost per gallon. The following are required for production of a 100 gallon batch:
1,960 ounces of lime Kool-Drink at $.12 per ounce
40 pounds of granulated sugar at $.60 per pound
63 kiwi fruit at $.50 each
100 protein tablets at $.90 each
4,000 ounces of water at $.003 per ounce
Pane estimates that 2% of the lime Kool-Drink is wasted, 20% of the sugar is lost, and 10% of the
kiwis cannot be used.
Instructions
Compute the standard cost of the ingredients for one gallon of the nutrition drink.
Problem Solving, IMA: Cost Management
Standard Costs and Balanced Scorecard
FOR INSTRUCTOR USE ONLY
23 - 45
Solution 202 (15–20 min.)
Ex. 203
Engines Done Right Co. is trying to establish the standard labor cost of a typical engine tune-up.
The following data have been collected from time and motion studies conducted over the past
month.
Actual time spent on the tune-up 1.0 hour
Hourly wage rate $16
Payroll taxes 10% of wage rate
Setup and downtime 10% of actual labor time
Cleanup and rest periods 20% of actual labor time
Fringe benefits 25% of wage rate
Instructions
(a) Determine the standard direct labor hours per tune-up
(b) Determine the standard direct labor hourly rate.
(c) Determine the standard direct labor cost per tune-up.
(d) If a tune-up took 1.5 hours at the standard hourly rate, what was the direct labor quantity
variance?
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
23 - 46
Solution 203 (Cont)
= $4.32 U
Ex. 204
Riggins, Inc. manufactures one product called tybos. The company uses a standard cost system
and sells each tybo for $8. At the start of monthly production, Riggins estimated 9,500 tybos
would be produced in March. Riggins has established the following material and labor standards
to produce one tybo:
Standard Quantity Standard Price
Direct materials 2.5 pounds $3 per pound
Direct labor 0.6 hours $10 per hour
During March 2013, the following activity was recorded by the company relating to the production
of tybos:
1. The company produced 9,000 units during the month.
2. A total of 24,000 pounds of materials were purchased at a cost of $66,000.
3. A total of 24,000 pounds of materials were used in production.
4. 5,000 hours of labor were incurred during the month at a total wage cost of $55,000.
Instructions
Calculate the following variances for March for Riggins, Inc.
(a) Materials price variance
(b) Materials quantity variance
(c) Labor price variance
(d) Labor quantity variance
Standard Costs and Balanced Scorecard
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Ex. 205
The following direct labor data pertain to the operations of Pearce Corp. for the month of
November:
Actual labor rate $12.25 per hr.
Actual hours used 18,000
Standard labor rate $12.00 per hr.
Standard hours allowed 17,100
Instructions
Prepare a matrix and calculate the labor variances.
Price Variance Quantity Variance
Total
Labor Variance
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
FOR INSTRUCTOR USE ONLY
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Ex. 206
The following direct materials data pertain to the operations of Wright Co. for the month of
December.
Standard materials price $5.00 per pound
Actual quantity of materials purchased and used 16,500 pounds
The standard cost card shows that a finished product contains 4 pounds of materials. The 16,500
pounds were purchased in December at a discount of 4% from the standard price. In December,
4,000 units of finished product were manufactured.
Instructions
Prepare a matrix for materials and calculate the materials variances.
Price Variance Quantity Variance
Total
Materials Variance
Standard Costs and Balanced Scorecard
FOR INSTRUCTOR USE ONLY
23 - 49
Solution 206 (13–18 min.)
Ex. 207
Seacoast Company provided the following information about its standard costing system for
2013:
Standard Data Actual Data
Materials 10 lbs. @ $4 per lbs. Produced 4,000 units
Labor 3 hrs. @ $21 per hr. Materials purchased 50,000 lbs. for $215,000
Budgeted production 3,500 units Materials used 41,000 lbs.
Labor worked 11,000 hrs. costing $220,000
Instructions
Calculate the labor price variance and the labor quantity variance.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
FOR INSTRUCTOR USE ONLY
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Ex. 208
Lumberman Manufacturing provided the following information about its standard costing system
for 2013:
Standard Data Actual Data
Materials 10 lbs. @ $4 per lbs. Produced 4,000 units
Labor 3 hrs. @ $21 per hr. Materials purchased 50,000 lbs. for $215,000
Budgeted production 3,500 units Materials used 41,000 lbs.
Labor worked 11,000 hrs. costing $220,000
Instructions
Determine the amount of the materials price variance. By how much will the materials price
variances differ if the price variance is determined at the time of production?
Ex. 209
Shep Corporation estimated it would produce 6,200 buckets, though actual production was 6,000
during August. The standard labor cost is 2 buckets per hour at $18.00 per hour. Actual cost per
hour was $18.40 with a total labor cost of $53,360.
Instructions
Determine the amounts of the labor price and the labor quantity variances for August.
Standard Costs and Balanced Scorecard
FOR INSTRUCTOR USE ONLY
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Ex. 210
Purvis Manufacturing, which produces a single product, has prepared the following standard cost
sheet for one unit of the product.
Direct materials (6 pounds at $2 per pound) $12
Direct labor (2 hours at $12 per hour) $24
During the month of April, the company manufactures 300 units and incurs the following actual
costs.
Direct materials purchased and used (1,850 pounds) $4,070
Direct labor (620 hours) $7,130
Instructions
Compute the total, price, and quantity variances for materials and labor.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
FOR INSTRUCTOR USE ONLY
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Ex. 211
Platt Company produces one product, a putter called PAR-putter. Platt uses a standard cost
system and determines that it should take one hour of direct labor to produce one PAR-putter.
The normal production capacity for this putter is 100,000 units per year. The total budgeted
overhead at normal capacity is $500,000 comprised of $200,000 of variable costs and $300,000
of fixed costs. Platt applies overhead on the basis of direct labor hours.
During the current year, Platt produced 85,000 putters, worked 89,000 direct labor hours, and
incurred variable overhead costs of $160,000 and fixed overhead costs of $300,000.
Instructions
(a) Compute the predetermined variable overhead rate and the predetermined fixed overhead
rate.
(b) Compute the applied overhead for Platt for the year.
(c) Compute the total overhead variance.
Standard Costs and Balanced Scorecard
FOR INSTRUCTOR USE ONLY
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Ex. 212
Hector Company has developed the following standard costs for its product for 2012:
HECTOR COMPANY
Standard Cost Card
Product A
Cost Element Standard Quantity × Standard Price = Standard Cost
Direct materials 4 pounds $3 $12
Direct labor 3 hours 8 24
Manufacturing overhead 3 hours 4 12
$48
The company expected to produce 30,000 units of Product A in 2013 and work 90,000 direct
labor hours.
Actual results for 2013 are as follows:
• 31,000 units of Product A were produced.
• Actual direct labor costs were $746,200 for 91,000 direct labor hours worked.
• Actual direct materials purchased and used during the year cost $346,500 for 126,000 pounds.
• Actual variable overhead incurred was $155,000 and actual fixed overhead incurred was
$205,000.
Instructions
Compute the following variances showing all computations to support your answers. Indicate
whether the variances are favorable or unfavorable.
(a) Materials quantity variance.
(b) Total direct labor variance.
(c) Direct labor quantity variance.
(d) Direct materials price variance.
(e) Total overhead variance.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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Solution 212 (Cont.)
Ex. 213
Dart Company developed the following standard costs for its product for 2013:
DART COMPANY
Standard Cost Card
Cost Elements Standard Quantity × Standard Price = Standard Cost
Direct materials 4 pounds $ 5 $20
Direct labor 2 hours 10 20
Variable overhead 2 hours 4 8
Fixed overhead 2 hours 2 4
$52
The company expected to work at the 120,000 direct labor hours level of activity and produce
60,000 units of product.
Actual results for 2013 were as follows:
• 56,800 units of product were actually produced.
• Direct labor costs were $1,092,000 for 112,000 direct labor hours actually worked.
• Actual direct materials purchased and used during the year cost $1,108,800 for 231,000
pounds.
• Total actual manufacturing overhead costs were $680,000.
Instructions
Compute the following variances for Dart Company for 2013 and indicate whether the variance is
favorable or unfavorable.
1. Direct materials price variance.
2. Direct materials quantity variance.
3. Direct labor price variance.
4. Direct labor quantity variance.
a5. Overhead controllable variance.
a6. Overhead volume variance.
Standard Costs and Balanced Scorecard
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Solution 213 (20–25 min.)
Ex. 214
Flagstaff, Inc. uses standard costing for its one product, baseball bats. The standards call for 3
board-feet of wood at $1.40 per board-foot, and 45 minutes of work at $12 per hour per bat. Total
manufacturing overhead costs were estimated at $9,450, of which the variable portion was $0.50
per bat and the fixed portion was $1.00 per bat with an estimate of 6,300 bats to be produced.
Flagstaff identifies price variances at the earliest possible point in time.
During March, the company had the following results:
Direct labor used = 4,800 hours at a cost of $56,400
Actual manufacturing overhead fixed costs = $6,000
Actual manufacturing overhead variable costs = $3,100
Bats produced = 6,000
Instructions
Compute the following variances for March.
1. Labor quantity variance
2. Total labor variance
a3. Overhead controllable variance
a4. Overhead volume variance
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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Solution 214 (12 min.)
Ex. 215
Prescott Manufacturing manufactures widgets for distribution. The standard costs for the
manufacture of widgets follow:
Standard Costs Actual Costs
Direct materials 3 lbs. per widget at 31,000 lbs. at $34
$35 per pound per pound
Direct labor 2.5 hours per widget 22,500 hours at
at $11 per hour $11.80 per hour
Factory overhead Variable cost, $24/widget $241,500 variable cost
Fixed cost, $40/widget $381,250 fixed cost
Budgeted factory overhead was $640,000. Overhead applied is based on widgets produced. The
company estimated that 10,000 widgets would be produced; however, only 9,600 were produced.
Instructions
Calculate the following amounts.
1. Rate at which total factory overhead is applied
2. Materials price variance
3. Total materials variance
a4. Overhead volume variance
a5. Overhead controllable variance
Standard Costs and Balanced Scorecard
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Solution 215 (12 min.)
Ex. 216
More Hits Company manufactures aluminum baseball bats that it sells to university athletic
departments. It has developed the following per unit standard costs for 2013 for each baseball
bat:
Manufacturing
Direct Materials Direct Labor Overhead
Standard Quantity 2 Pounds (Aluminum) 1/2 hour 1/2 hour
Standard Price $4.00 $10.00 $6.00
Unit Standard Cost $8.00 $5.00 $3.00
In 2013, the company planned to produce 120,000 baseball bats at a level of 60,000 hours of
direct labor.
Actual results for 2013 are presented below:
1. Direct materials purchases were 246,000 pounds of aluminum which cost $1,020,900.
2. Direct materials used were 220,000 pounds of aluminum.
3. Direct labor costs were $575,260 for 58,700 direct labor hours actually worked.
4. Total manufacturing overhead was $352,000.
5. Actual production was 114,000 baseball bats.
Instructions
(a) Compute the following variances:
1. Direct materials price.
2. Direct materials quantity.
3. Direct labor price.
4. Direct labor quantity.
5. Total overhead variance.
a(b) Prepare the journal entries to record the transactions and events in 2013.
