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10-41
PROBLEM 10-46 (50 MINUTES)
1.
a.
Direct-labor rate variance
=
(AH
AR) – (AH
SR)
b.
Direct-labor efficiency variance
=
(AH
SR) – (SH
SR)
*Standard allowed direct-labor hours:
Completed units ................
5,600 units 6 hours per unit
33,600 hours
c.
Actual quantity of material used:
Direct-material quantity variance
=
(AQ
SP) – (SQ SP)
*Standard quantity of material allowed:
Completed units ...................
5,600 units 8 kilograms
44,800 kilograms
10-42
PROBLEM 10-46 (CONTINUED)
d.
Actual price paid per kilogram of direct material:
e.
Direct-material and direct-labor cost transferred to finished goods:
Direct-material
f.
Direct-material and direct-labor cost in September 30 balance of Work-in-Process
Inventory:
Chapter 10 - Standard Costing and Analysis of Direct Costs
10-43
PROBLEM 10-46 (CONTINUED)
*Direct-material purchase price variance
=
PQ(AP – SP)
To record the purchase of raw material and the direct-material purchase price
variance.
To add the direct-material cost to work in process and record the direct-material
quantity variance.
Chapter 10 - Standard Costing and Analysis of Direct Costs
10-44
PROBLEM 10-47 (60 MINUTES)
1.
Standard cost schedule:
DIRECT MATERIAL
Construction
Department
Finishing
Department
Standard quantity
Direct material and parts in finished product:
Standard price:
Direct material and parts:
Standard direct-material cost:
Standard quantity ........................................
8 lbs
1 set
DIRECT LABOR
Construction
Department
Finishing
Department
Standard direct-labor cost:
Standard quantity ........................................
6 hrs
3 hrs
Chapter 10 - Standard Costing and Analysis of Direct Costs
10-45
PROBLEM 10-47 (CONTINUED)
2.
(a)
Construction Department:
DIRECT-MATERIAL PRICE AND QUANTITY VARIANCES
ACTUAL MATERIAL COST
PROJ. MATERIAL COST
STANDARD MATERIAL COST
Actual
Quantity
Actual
Price
Actual
Quantity
Standard
Price
Standard
Quantity
Standard
Price
6,750
$12.50
6,750
$12.00
6,000
$12.00
$84,375
$81,000
$72,000
DIRECT-MATERIAL PURCHASE PRICE VARIANCE
ACTUAL MATERIAL COST
PROJ. MATERIAL COST
Actual
Quantity
Actual
Price
Actual
Quantity
Standard
Price
Chapter 10 - Standard Costing and Analysis of Direct Costs
10-46
PROBLEM 10-47 (CONTINUED)
DIRECT-LABOR RATE AND EFFICIENCY VARIANCES
ACTUAL LABOR COST
PROJ. LABOR COST
STANDARD LABOR COST
Actual
Hours
Actual
Rate
Actual
Hours
Standard
Rate
Standard
Hours
Standard
Rate
$4,275 Favorable
$4,500 Favorable
Direct-labor
rate variance
Direct-labor
efficiency variance
(b)
Finishing Department:
DIRECT-LABOR RATE AND EFFICIENCY VARIANCES
ACTUAL LABOR COST
PROJ. LABOR COST
STANDARD LABOR COST
Actual
Hours
Actual
Rate
Actual
Hours
Standard
Rate
Standard
Hours
Standard
Rate
2,355
$16
2,355
$15
2,250
$15
10-47
PROBLEM 10-47 (CONTINUED)
3.
Cost variance report:
MCCARTNEY COMPANY
COST VARIANCE REPORT
FOR THE MONTH OF JULY
Construction Dept
Finishing Dept
Amount
% of
Standard
Cost
Amount
% of
Standard
Cost
Direct material:
Standard cost, given
Direct labor:
Standard cost, given
actual output ...............
$90,000
—
$33,750
—
10-48
PROBLEM 10-48 (45 MINUTES)
1.
Journal entries:
Raw-Material Inventory ........................................................
108,000
To record purchase of veneered wood.
To record purchase of bridges and strings.
To record usage of veneered wood.
To record usage of bridges and strings.
To record Construction Department direct-labor costs and variances.
10-49
PROBLEM 10-48 (CONTINUED)
Finished-Goods Inventory ...................................................
207,000
Accounts Receivable ...........................................................
175,500
Cost of Goods Sold ..............................................................
8,655
Chapter 10 - Standard Costing and Analysis of Direct Costs
10-50
PROBLEM 10-48 (CONTINUED)
2.
Posting of journal entries:
Raw-Material Inventory
Accounts Receivable
108,000
81,000
175,500
13,500
11,250
Cost of Goods Sold
Sales Revenue
124,200
175,500
8,655
Direct-Material Purchase
Price Variance
Direct-Labor Rate Variance
Chapter 10 - Standard Costing and Analysis of Direct Costs
10-51
SOLUTIONS TO CASES
CASE 10-49 (60 MINUTES)
1.
Standard cost of lots N42, N43, and N44:
METRO FASHIONS, INC.
STANDARD COST OF PRODUCTION
FOR NOVEMBER
Lot
Quantity
(boxes)
Standard
Cost per
Box
Total
Standard
Cost
N42 .................................................................
2,000
$106.50
$213,000
2.
Variances (U denotes unfavorable; F denotes favorable):
a.
METRO FASHIONS, INC.
DIRECT-MATERIAL PURCHASE PRICE VARIANCE
FOR NOVEMBER
10-52
CASE 10-49 (CONTINUED)
b.
METRO FASHIONS, INC.
DIRECT-MATERIAL QUANTITY VARIANCES
FOR NOVEMBER
Lot no.
N42
N43
N44
Total
Direct-material quantity
variance:
Standard yards:
Chapter 10 - Standard Costing and Analysis of Direct Costs
10-53
CASE 10-49 (CONTINUED)
c. and d.
METRO FASHIONS, INC.
DIRECT-LABOR VARIANCES
FOR NOVEMBER
Lot no.
N42
N43
N44
Total
Direct-labor efficiency variance:
Standard hours:
Boxes in lot ............................
2,000
3,400
2,400
Standard hours
Lot no.
N42
N43
N44
Total
Direct-labor rate variance:
Actual hours worked .............
5,960
10,260
5,780
22,000
Rate paid in excess of standard
CASE 10-49 (CONTINUED)
3.
Journal entries:
Raw-material Inventory ........................................................
209,000*
To record the purchase of raw material.
Work-in-Process Inventory ..................................................
205,920*
To add direct-material cost to work-in-process inventory and record the direct-material
quantity variance.
Work-in-Process Inventory ..................................................
322,812*
10-55
CASE 10-50 (75 MINUTES)
The completed list is shown below. Begin by filling in the facts you know. The reasoning
used to reduce the remaining data is explained after the list of answers.
1.
Actual output (in drums)
=
drum per Amaterialdirect of quanity standard
output actual given allowed, Amaterialdirect of quantity standard
2.
Direct material
A
B
a.
Standard quantity per drum ........................................
10 lb.
5 gal.a
b.
Standard price .............................................................
$5.00/lb.
$3.00/gal.b
aStandard quantity of direct material B per drum
=
output actual
output actual given allowed, B materialdirect of quantity standard
bStandard price of direct material B
=
drum per allowed quantity standard
drum per B material ofcost standard
Chapter 10 - Standard Costing and Analysis of Direct Costs
10-56
CASE 10-50 (CONTINUED)
cStandard cost of direct material A per drum = 10 lbs. $5.00 per lb. = $50.00.
dThe reasoning for the actual price of direct material B is as follows, where the
subscripts denote materials A and B:
eThis conclusion comes from the following formula for the quantity variance:
Quantity variance (A)
=
SP(AQ – SQ)
Chapter 10 - Standard Costing and Analysis of Direct Costs
10-57
CASE 10-50 (CONTINUED)
3.
Direct labor:
I
(mixers)
II
(packers)
a.
Standard hours per drum ............................................
2 hr.a
4 hr.
b.
Standard rate per hour ................................................
$15.00
$12.00b
aStandard hours of direct labor type I per drum
=
hour per rate standard
drum per I labordirect ofcost standard
bDirect labor type II, standard rate per hour
=
drum per hours standard
drum per II typelabordirect ofcost standard
cDirect labor type I, standard quantity allowed, given actual output
Chapter 10 - Standard Costing and Analysis of Direct Costs
10-58
CASE 10-50 (CONTINUED)
eDirect labor type II, actual hours = 6,150 hr. Use the formula for the direct-labor
efficiency variance, as follows:
Direct-labor (II) efficiency variance
=
SR (AH – SH)
gDirect labor type I, efficiency variance = zero.
Chapter 10 - Standard Costing and Analysis of Direct Costs
10-59
CASE 10-50 (CONTINUED)
Now fill in the remaining variances in the following tabulation:
Direct-material variances:
A:
Purchase price variance ....................................................................
$9,000
F
Chapter 10 - Standard Costing and Analysis of Direct Costs
10-60
FOCUS ON ETHICS (See page 431 in the text.)
Was sacrificing quality to cut standards ethical in this situation?
Smith did not act ethically when he ordered wood of an inferior quality as he knew that
his actions would harm customers (through provision of inferior products) and the
company (both through product replacement costs and through damage to its
