Review of Chapters 7 and 8, 3 variance analysis. (CPA, adapted). The Beal Manufa

Question

Review of Chapters 7 and 8, 3 variance analysis. (CPA, adapted). The Beal Manufacturing Company's costing system has two direct-cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct manufacturing labor-hours (DHL). At the beginning of 2012, Beal adopted the following standards for its manufacturing costs:

Input Cost per output units
Direct Materials 3 lb at $5 per lb $15.00
Direct Manufacturing labor 5 hrs at $15 per hr $75.00
Variable $6 per DHL 30.00
Fixed $8 per DHL 40.00
Standard manufacturing cost per output unit $160.00

The denominator level for total manufacturing overhead per month in 2012 is 40,000 direct manufacturing labor-hours. Beal's flexible budget for January 2012 was based on this denominator level. The records for January indicated the following:

Direct materials purchased 25,000 lb at $5.20 per lb
Direct materials used 23,100 lb
Direct manufacturing labor 40,100 hrs at $14.60 per hr
Total actual manufacturing overhead(variable and fixed) $600,000
Actual production 7.800 output units

Required:
1. Prepare a schedule of total standard manufacturing costs for the 7,800 output units in January 2012.
2. For the month of January 2012, compute the following variances, indicating whether each is favorable(F)
or unfavorable(U):
a) direct materials price variance, based on purchases
b) direct materials efficiency variance
c) direct manufacturing labor price variance
d) direct manufacturing labor efficiency variance
e) total manufacturing overhead spending variance
f) variable manufacturing overhead efficiency variance
g) production-volume variance

Explanation / Answer

Actual Input Qty. Budgeted Price F l e x i b l e B u d g e t : B u d g e t e d I n p u t Q t y . A l l o w e d f o r Actual Rate (25,000 $5.8) $145,000 Direct Materials Purchases (25,000 $6) $150,000 Usage (23,100 $6) $138,600 $5,000 F $1,800 F Price variance Direct Manufacturi ng Labor Budgeted Price (7,800 3x$6) $140,400 (80,200 $7.35) $589,470 Efficiency variance (80,200 $7.5) $601,500 (7,800 10 $7.5) $585,000 $12,030 F $16,500 U Price variance Efficiency variance Actual Costs Incurred Variable Manufacturi ng Overhead Actual Input Qty. Budgeted Rate Flexible Budget: Budgeted Input Qty. Allowed for Actual Output Budgeted Rate $449,610 * ( 80,200 $6) $481,200 (7,800 1 0 $6) $468,000 $31,590 F Spending variance Allocated: (Budgeted Input Qty. Allowed for Actual Output Budgeted Rate) (7,800 10 $6) $468,000 $13,200 U Efficiency variance Never a variance *Actual Variable Overhead incurred: $850,610-$401,000=$449,610 Fixed Manufacturi ng Overhead $401,000a $1,000 U $400,000b $400,000 (7,800 x 10 $5.0) $390,000 $10,000 U h. Spending variance Never a variance g. Production volume variance Actual Fix Overhead incurred: 80,200* $5=$401,000 b Budgeted Fixed Overhead: 80,000 x $5/DLH = $400,000

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.