Principles of Cost Accounting
17th Edition
ISBN: 9781305087408
Author: Edward J. Vanderbeck, Maria R. Mitchell
Publisher: Cengage Learning
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Question
Chapter 8, Problem 2E
a.
To determine
Provide a
a.
Expert Solution
Explanation of Solution
Materials—2 lb @ $8 | $16 |
Labor—1 hr @ $10 | $10 |
Factory overhead | $4 |
Standard unit cost | $30 |
Figure (1)
b.
To determine
Examine the variances for materials and labor.
b.
Expert Solution
Explanation of Solution
Case 1:
Calculate Labor rate variance:
Case 2:
Calculate labor efficiency variance:
Note: There are no material variances in these cases.
c.
To determine
Prepare journal entries.
c.
Expert Solution
Explanation of Solution
Case 1:
Date | Account Title and Explanation | Debit ($) | Credit($) |
Work in Process | $16,000 | ||
Materials Price Variance | $1,000 | ||
Materials | $17,000 | ||
(to record the entry for direct materials cost when the materials are issued into production) |
Table (1)
Date | Account Title and Explanation | Debit ($) | Credit($) |
Work in Process | $10,000 | ||
Labor Rate Variance | $200 | ||
Payroll | $10,200 | ||
(to record the entry for direct labor cost) |
Table (2)
Date | Account Title and Explanation | Debit ($) | Credit($) |
Work in Process | $4,000 | ||
Applied Factory overhead | $4,000 | ||
(to record the entry applying factory overhead to work in process) |
Table (3)
Case 2:
Date | Account Title and Explanation | Debit ($) | Credit($) |
Work in Process | $16,000 | ||
Materials | $16,000 | ||
(to record the entry for direct materials cost when the materials are issued into production) |
Table (4)
Date | Account Title and Explanation | Debit ($) | Credit($) |
Work in Process | $10,000 | ||
Labor efficiency Variance | $1,000 | ||
Payroll | $9,000 | ||
(to record the entry for direct labor cost) |
Table (5)
Date | Account Title and Explanation | Debit ($) | Credit($) |
Work in Process | $4,000 | ||
Applied Factory overhead | $4,000 | ||
(to record the entry applying factory overhead to work in process) |
Table (6)
d.
To determine
Prepare the
d.
Expert Solution
Explanation of Solution
Case 1 and case 2:
Date | Account Title and Explanation | Debit ($) | Credit($) |
Finished Goods | $30,000 | ||
Work in process | $30,000 | ||
(to record the entry for finished goods at standard cost) |
Table (7)
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Students have asked these similar questions
In all of the exercises involving variances, use “F” and “U” to designate favorable and unfavorable variances, respectively.
E8-1 through E8-5 use the following data: The standard operating capacity of Tecate Manufacturing Co. is 1,000 units. A detailed study of the manufacturing data relating to the standard production cost of one product revealed the following:
1. Two pounds of materials are needed to produce one unit.
2. Standard unit cost of materials is $8 per pound.
3. It takes one hour of labor to produce one unit.
4. Standard labor rate is $10 per hour.
5. Standard overhead (all variable) for this volume is $4,000.
Each case in E8-1 through E8-5 requires the following:
a. Set up a standard cost summary showing the standard unit cost.
b. Analyze the variances for materials and labor.
c. Make journal entries to record the transfer to Work in Process of:
1. Material cost
2.Labor cost
3. Overhead cost
(When making these entries, include the variances.)
d. Prepare the journal entry…
In all of the exercises involving variances, use “F” and “U” to designate favorable and unfavorable variances, respectively.
E8-1 through E8-5 use the following data:
The standard operating capacity of Tecate Manufacturing Co. is 1,000 units. A detailed study of the manufacturing data relating to the standard production cost of one product revealed the following:
1. Two pounds of materials are needed to produce one unit.
2. Standard unit cost of materials is $8 per pound.
3. It takes one hour of labor to produce one unit.
4. Standard labor rate is $10 per hour.
5. Standard overhead (all variable) for this volume is $4,000.
Each case in E8-1 through E8-5 requires the following:
a. Set up a standard cost summary showing the standard unit cost.
b. Analyze the variances for materials and labor.
c. Make journal entries to record the transfer to Work in Process of:
1. Material cost
2. Labor Cost
3. Overhead cost (When making these entries, include the variances.)
d.…
Schematize pertormance analysis and comment on
variances.
Following is the data of a manufacturing concern. From
the figures given below, calculate:
() Materials Cost Variance
(W) Material Price Varlance
(H) Material Usage Variance
Product X
During a particular period 160 tons of output was
undertaken. The standard price per unit of materials is
$20. The materials required for actual production were
4,000 units. An amount of $16,000 was spent on
purchasing the materlals. The standard quantity of
materials requlred for producing one fon of output is 120
units.
Product Y
The standard quantity of materlals required for producing
one ton of output is 240 unils. The standard price per unit
of materials is $24. During a porticular period d40 fons of
production were 24.000 units. An amount of $48.000 was
spent on purchasing the materials
output was undertaken. The materials required for octual
Chapter 8 Solutions
Principles of Cost Accounting
Ch. 8 - How does a standard cost accounting system work,...Ch. 8 - What is the difference between the standard cost...Ch. 8 - Prob. 3QCh. 8 - What are the specific procedures on which a...Ch. 8 - How are standards for materials and labor costs...Ch. 8 - What is a variance?Ch. 8 - How do price and quantity variances relate to...Ch. 8 - How do rate and efficiency variances relate to...Ch. 8 - Prob. 9QCh. 8 - How does a materials purchase price variance...
Ch. 8 - Prob. 11QCh. 8 - Prob. 12QCh. 8 - When a company uses a standard cost system, are...Ch. 8 - What two factors must be considered when breaking...Ch. 8 - What might cause the following materials...Ch. 8 - What might cause the following labor variances?
An...Ch. 8 - Prob. 17QCh. 8 - Prob. 18QCh. 8 - Prob. 19QCh. 8 - Prob. 20QCh. 8 - When does a flexible-budget variance occur?
Ch. 8 - Why is it important to determine flexible-budget...Ch. 8 - Prob. 23QCh. 8 - What is the significance of a production-volume...Ch. 8 - If production is more or less than the standard...Ch. 8 - At the end of the current fiscal year, the trial...Ch. 8 - What variances from the four-variance method are...Ch. 8 - What is the primary difference between the...Ch. 8 - What are the four variances in the four-variance...Ch. 8 - In all of the exercises involving variances, use F...Ch. 8 - Prob. 2ECh. 8 - Prob. 3ECh. 8 - Prob. 4ECh. 8 - Prob. 5ECh. 8 - Computing materials variances D-List Calendar Co....Ch. 8 - Computing labor variances LIFT Inc. manufactures...Ch. 8 - Standard cost summary; materials and labor cost...Ch. 8 - Computing labor variances Fill in the missing...Ch. 8 - Standard unit cost and journal entries The normal...Ch. 8 - Making journal entries Assume that during the...Ch. 8 - Using variance analysis and interpretation Last...Ch. 8 - Using variance analysis and interpretation Last...Ch. 8 - Journalizing standard costs in two departments...Ch. 8 - Calculating factory overhead The standard capacity...Ch. 8 - Determining Budgeted Overhead The overhead...Ch. 8 - Calculating factory overhead: two variances Munoz...Ch. 8 - Calculating factory overhead: two variances...Ch. 8 - The normal capacity of a manufacturing plant is...Ch. 8 - Calculating amount of factory overhead applied to...Ch. 8 - Georgia Gasket Co. budgets 8,000 direct labor...Ch. 8 - (Appendix) Calculating factory overhead: four...Ch. 8 - (Appendix) Calculating factory overhead: three...Ch. 8 - Materials and labor variances Branca Inspections...Ch. 8 - Materials and labor variances Fausto Fabricators...Ch. 8 - Zippy Inc. manufactures a fuel additive, Surge,...Ch. 8 - Calculation of materials and labor variances
Fritz...Ch. 8 - High-End Products Inc. uses a standard cost system...Ch. 8 - RDI Products Co. manufactures a variety of...Ch. 8 - The standard cost summary for the most popular...Ch. 8 - Carlo Lee Corp. has established the following...Ch. 8 - USD Inc. has established the following standard...Ch. 8 - Allocation of variances
Costa Brava Manufacturing...Ch. 8 - On May 1, Athens Inc. began the manufacture of a...Ch. 8 - The standard specifications for an electric motor...Ch. 8 - Cardiff Inc. manufactures men’s sport shirts for...Ch. 8 - Fargo Co. manufactures products in batches of 100...Ch. 8 - Prob. 15PCh. 8 - (Appendix) Overhead variances—four variance
Mobile...Ch. 8 - Shinto Corp. uses a standard cost system and...Ch. 8 - Kamen Manufacturing Co. estimates the following...Ch. 8 - Prob. 19PCh. 8 - Jillian Manufacturing Inc. manufactures a single...Ch. 8 - Cost and production data for Binghamton Beverages...
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- In all of the exercises involving variances, use F and U to designate favorable and unfavorable variances, respectively. E8-1 through E8-5 use the following data: The standard operating capacity of Tecate Manufacturing Co. is 1,000 units. A detailed study of the manufacturing data relating to the standard production cost of one product revealed the following: 1. Two pounds of materials are needed to produce one unit. 2. Standard unit cost of materials is 8 per pound. 3. It takes one hour of labor to produce one unit. 4. Standard labor rate is 10 per hour. 5. Standard overhead (all variable) for this volume is 4,000. Each case in E8-1 through E8-5 requires the following: a. Set up a standard cost summary showing the standard unit cost. b. Analyze the variances for materials and labor. c. Make journal entries to record the transfer to Work in Process of: 1. Materials costs 2. Labor costs 3. Overhead costs (When making these entries, include the variances.) d. Prepare the journal entry to record the transfer of costs to the finished goods account. Standard unit cost; variance analysis; journal entries 1,000 units were started and finished. Case 1: All prices and quantities for the cost elements are standard, except for materials cost, which is 8.50 per pound. Case 2: All prices and quantities for the cost elements are standard, except that 1,900 lb of materials were used.arrow_forwardRecompute the variances from the second Acme Inc. exercise using $0.0725 as the standard cost of the material and $14 as the standard labor cost per hour. How has your explanation of the variances changed?arrow_forwardThe management of Golding Company has determined that the cost to investigate a variance produced by its standard cost system ranges from 2,000 to 3,000. If a problem is discovered, the average benefit from taking corrective action usually outweighs the cost of investigation. Past experience from the investigation of variances has revealed that corrective action is rarely needed for deviations within 8% of the standard cost. Golding produces a single product, which has the following standards for materials and labor: Actual production for the past 3 months follows, with the associated actual usage and costs for materials and labor. There were no beginning or ending raw materials inventories. Required: 1. What upper and lower control limits would you use for materials variances? For labor variances? 2. Compute the materials and labor variances for April, May, and June. Identify those that would require investigation by comparing each variance to the amount of the limit computed in Requirement 1. Compute the actual percentage deviation from standard. Round all unit costs to four decimal places. Round variances to the nearest dollar. Round variance rates to three decimal places so that percentages will show to one decimal place. 3. CONCEPTUAL CONNECTION Let the horizontal axis be time and the vertical axis be variances measured as a percentage deviation from standard. Draw horizontal lines that identify upper and lower control limits. Plot the labor and material variances for April, May, and June. Prepare a separate graph for each type of variance. Explain how you would use these graphs (called control charts) to assist your analysis of variances.arrow_forward
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