On April 1, 2016 Bully Company began the manufacture of a new dog treat known as

Question

On April 1, 2016 Bully Company began the manufacture of a new dog treat known as a Bully-it Stick. The company installed a standard costing system to account for manufacturing costs. The standard costs for a unit of Bully-it follow:

Direct materials (3 lb. at $5 per lb.)
Direct manufacturing labor (1/2 hour at $20 per hour)
Manufacturing overhead (applied at 75% of direct manufacturing labor costs)

The following data was obtained from Bully company’s records for the month of April:

$15.00 10.00 7.50

Debit Credit

Revenues $125,000 (Cr)
Accounts Payable control (for April's purchases of direct materials) $68250 Cr

Direct materials price variance 3250 Dr

Direct materials efficiency variance 2500 Dr
Direct manufacturing labor price variance 1900 Dr
Direct manufacturing labor efficiency variance 2000 Dr

Actual production in April was 4,000 units of Bully-it, and actual sales in April were 2,500 units.

The amount shown for direct materials price variance applies to materials purchased during April. There was no beginning inventory of materials on April 1, 2016.

Required: Compute each of the following items for Bully Company for the month of April. Show your computations but clearly indicate your final answer. You might want to consider using two AAASSSQP formats: one for materials and one for labor. (If your answer spans multiple sheets, you must staple them together when you turn them in.)

1.Standard quantity of direct materials allowed (in pounds)

2.Actual quantity of direct materials used (in pounds)

3.Actual quantity of direct materials purchased (in pounds)

4.Actual direct materials price per pound (rounded to the penny)

5.Standard direct manufacturing labor-hours allowed for actual output produced

6.Actual direct manufacturing labor-hours worked

7.Actual direct manufacturing labor wage rate (rounded to the dollar)

Debit Credit

Revenues $125,000 (Cr)
Accounts Payable control (for April's purchases of direct materials) $68250 Cr

Direct materials price variance 3250 Dr

Direct materials efficiency variance 2500 Dr
Direct manufacturing labor price variance 1900 Dr
Direct manufacturing labor efficiency variance 2000 Dr

Explanation / Answer

1)standard quantity of direct materials allowed = 4000(AU) *3(AQ) = 12000 pounds

2)Actual quantity of direct materials used :

Material efficiency variance = SR [AQ-SQ]

2500 = 5 [ AQ- 12000]

2500/5 = AQ-12000

AQ used = 500+12000= 12500 pounds

3)Actual quantity of direct materials purchased:=Actual quantity used as there is no beginning inventory .=12500 pounds

4) Price variance =AQ [AR-SR]

         3250 =   12500 [ar- 5]

         3250 /12500 =AR- 5

            AR= .26+ 5

                   = $ 5.26 Per pound

5)Standard direct manufacturing labor-hours allowed for actual output produceD= 4000*1/2 = 2000 hours

6) Actual direct manufacturing labor-hours worked:

Labor efficiency variance = SR [AH-SH]

    2000 = 20 [AH- 2000]

     2000/20 = AH- 2000

       AH = 100+ 2000 = 2100 hours

7)Price variance = AH [AR-SR]

   1900 = 2100 [AR- 20 ]

    1900/ 2100 = AR- 20

      .90 =AR -20

AR = 20+.90 =$ 20.9 per Hour

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