P11-52A Determine all variances and make journal entries (Learning Objectives 2,
ID: 2524442 • Letter: P
Question
P11-52A Determine all variances and make journal entries (Learning Objectives 2, 3, 4, 5,6, &7) Anders Clothing manufactures emaroidered jackets. The company uses a standard cost system to control manufacturing costs. The folowing data represent the standard urit cost of a jacket: $11.40 Direct materials (3.0 sq. ft x S3.80 per sq. ft.. Direct labor (2.0 hours $9.50 per hour)..... Manufacturing overhead 19.00 Variable (2.0 hours X $0.58 per hour)... $1.16 $ 5.66 $36.06 4.50 Fixed (2.0 hours × $2.25 per hour) ..........................- Total standard cost per jacket... Fixed overhead in total was budgeted to be $64,200 for each month. Actual data for November of the current year include the following: a. Actual production was 13,500 jackets. b. Actual direct material used was 2.40 square feet per jacket at an actual cost of 3.90 psquare foot Actual direct labor usage of 24,800 hours for a total cost of $240,560 c. d. Actual fixed overhead cost was $56,565, while actual variable overhead cost was $17,360 Requirements 1. Compute the price and quantity variances for direct materials. 2. Compute the rate and efficiency variances for direct labor. 3. Compute the rate and efficiency variances for variable overhead. 4. Compute the fixed overhead budget variance and the fixed overhead volume variance. 5. Anders Clothing's management intentionally purchased superior materials for November production. How did the decision affect the other cost variances? Overall was the decision wise? Explain.Explanation / Answer
Answer 1
Price variance of Direct Material= (Std price - Actual Price) * Std Quantity for actual output
=(3.80-3.90) *3*13500 = $ 4050 Adverse (to produce 1 unit, Std Qty = 3 and actual output = $ 13500 jackets
Direct Materia Quantity Variance= (Std Qty -Actual Qty) * Std price per unit
=( 3*13500-2.40*13500) * 3.90 = $ 31590 Favourable
Answer 2
Labour Rate Variance - ( Std Rate - Actual Rate) * Actual Effective Hours
= (9.50-9.70) *24800= $ 4960 Adverse (Actual Rate = (240560/24800 = $9.70)
Labour Efficiency Variance =(Std Working Hours - Actul Hours ) * Sd Rate per hour
=( 2*13500 - 24800) * 9.50
= $20900 Favourable
Answer 3
Variable overhead Rate Variance - ( Std Rate - Actual Rate) * Actual Effective Hours
=(0.58 -0.70 ) * 24800 (Actual Rate = (17360/24800 = $0.70)
= $ 2976 Adverse
Variable overhead Efficiency Variance =(Std Working Hours - Actul Hours ) * Sd Rate per hour
=( 2*13500 - 24800) * 0.58
= $ 9106 Favourable
Answer 4
Fixed Overhead Budget Variance = Budgeted Fixed Overhead variance - Actual Overhead
= 64200 - 56565
= $ 7635 Favourable
Fixed Overhead Volume Variance = Absorbed Fixed Overhead - Budgeted Fixed Overhead
= Budgeted Rate * Actual hours - Budgeted Fixed Overhead
= $ 2.25 * 24800 - 64200
= 55800 -64200
= $ 8400 Adverse
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