AJack Partnership manufactures jackhammers. AJack Partnership is looking for gui
ID: 2479537 • Letter: A
Question
AJack Partnership manufactures jackhammers. AJack Partnership is looking for guidance in the variances of its standard cost system. It would like you to assist in understanding material price, material quantity, rate, efficiency, and overhead variances.
The standard cost card information for unit of product is below.
Standard cost card per unit of product
Direct materials: 4 pounds at $9.00 per pound of steel
$36.00
Direct labor: 2.0 direct labor hours at $20.00 per hour
40.00
Variable overhead: 100% of a direct labor hour at $10.00 per hour
20.00
Fixed overhead: 100% of a direct labor hour at $20.00 per hour
40.00
Standard cost per unit
$136.00
The following information is available in the year just finished:
AJack Partnership manufactured 10,000 jackhammers during the year.
The total purchases of steel in the year at a cost of $8.75 per pound were 45,000 pounds.
All of the material was used to manufacture the 10,000 jackhammers.
There was no beginning or ending inventory.
The material was purchased on January 15, 20XX
AJack Partnership incurred 21,000 direct labor hours at $19.50 per hour.
During the year, one production order was issued on February 15 20XX, number 789, for 10,000 jackhammers.
Actual variable overhead was $210,000.
Actual fixed overhead was $405,000.
Assignment Guidelines:
Material
Compute the material price variance for Jan 15, 20XX.
Provide the accounting entry for the price variance.
Labor
Compute the labor rate variance.
Compute the labor efficiency variance.
Provide the accounting entry for the labor rate and efficiency variances.
Overhead
Compute the variable overhead rate variance.
Compute the variable overhead efficiency variance.
Provide the accounting entry for the overhead rate and efficiency variances.
Standard cost card per unit of product
Direct materials: 4 pounds at $9.00 per pound of steel
$36.00
Direct labor: 2.0 direct labor hours at $20.00 per hour
40.00
Variable overhead: 100% of a direct labor hour at $10.00 per hour
20.00
Fixed overhead: 100% of a direct labor hour at $20.00 per hour
40.00
Standard cost per unit
$136.00
Explanation / Answer
No.of units 10000 Amount in $ Actual Quantity (AQ) 45000.00 Actual Quantity per unit 4.50 Actual rate (AR) per pound 8.75 Actual cost(AC) 393750.00 Standard Quantity 4.00 Standard Rate (SR) per pound 9.00 Standard Quantity for actual outputb 10000*4 40000.00 Actual hours 21000.00 Actual hours per unit 2.10 Actual Cost for labour 19.50 Actual Cost 409500.00 Standard hours 2.00 Standard rate per unit 40.00 Standard rate per hour 20.00 Standard hours allowed for work done 10000*2 20000.00 Direct Material Price Variance=Actual Quantity x Actual Price - Actual Quantity x Standard Price 45000*(8.75-9) -11250 Favorable Direct Material Usage Variance:(Actual Quantity - Standard Quantity) x Standard Price (45000-40000)*9 45000 UnFavorable Total Material Variance 33750 Unfavourable Accounts Title Dr Cr Raw Material (45000*9) 405000 Accounts Payable (45000*8.75) 393750.00 Material Price variance 11250.00 Direct Labor Rate Variance: Actual Cost-Standard Cost of Actual Hours 409500-(21000*20) -10500 Favorable Direct Labor Effciency Variance: Standard Rate(Actual Hours-Standard H0urs) 20*(21000-20000) 20000 UnFavorable Total Labor Variance 9500 UnFavorable Accounts Title Dr Cr Work In process 400000.00 Labor Efficiency Variance 20000 Labor Rate Variance 10500 Wages payable 409500.00 Variable Overhead Efficiency Variance (AH-SH)*SR (21000-(10000*2))*10 10000 UnFavorable Variable Overhead Spending Variance AHx (AR-SR) 21000*(10-10) 0 Dr Cr Cost of good sold/Finished Good Inventory 10000 Variable manufacturibg overhead 10000
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