Flexible Budget, Standard Cost Variances, T-Accounts Ingles Company manufactures
ID: 2544015 • Letter: F
Question
Flexible Budget, Standard Cost Variances, T-Accounts
Ingles Company manufactures external hard drives. At the beginning of the period, the following plans for production and costs were revealed:
During the year, 24,800 units were produced and sold. The following actual costs were incurred:
There were no beginning or ending inventories of direct materials. The direct materials price variance was $10,168 unfavorable. In producing the 24,800 units, a total of 12,772 hours were worked, 3 percent more hours than the standard allowed for the actual output. Overhead costs are applied to production using direct labor hours.
Required:
Instructions for parts 1 and 2: If a variance is zero, enter "0" and select "Not applicable" from the drop down box.
1. Prepare a performance report comparing expected costs to actual costs.
2. Determine the following. If a variance amount is zero, enter "0" and select "Not applicable" from the drop-down list.
a. Direct materials usage variance
$_
b. Direct labor rate variance
$_
c. Direct labor usage variance
$_
d. Fixed overhead spending and volume variances
e. Variable overhead spending and efficiency variances
3. Use T-accounts to show the flow of costs through the system. In showing the flow, you do not need to show detailed overhead variances. Show only the over- and underapplied variances for fixed and variable overhead. Record the following transactions in the T-accounts: If an amount is zero, enter "0".
(a) purchase of materials,
(b) issuance of materials into production,
(c) incurrence of direct labor cost,
(d) application of variable overhead cost to production,
(e) application of fixed overhead cost to production,
(f) transfer of finished goods to finished goods inventory,
(g) sale of goods,
(h) closure of Direct Materials Price Variance account,
(i) closure of Direct Materials Usage Variance account,
(j) closure of Direct Labor Efficiency Variance account,
(k) closure of Variable Overhead Control account, and
(l) closure of Fixed Overhead Control account.
Enter these transactions in the T-accounts in the same order that they are presented here.
Variable Overhead Control
Units to be produced and sold 25,000 Standard cost per unit: Direct materials $ 10 Direct labor 8 Variable overhead 4 Fixed overhead 3 Total unit cost $ 25Explanation / Answer
1.
Standard material cost for actual production = Standard material cost per unit x actual units produced
= $ 10 x 24,800 = $ 248,000
Standard labor cost for actual production = Standard labor cost per unit x actual units produced
= $ 8 x 24,800 = $ 198,400
Variable overhead cost for actual production = Standard overhead cost per unit x actual units produced
= $ 4 x 24,800 = $ 99,200
Fixed overhead cost for 25,000 units = $ 3 x 25,000 = $ 75,000
Fixed overhead cost for 24,800 = $ 75,000
Ingles Company
Performance Report
Cost Item
Actual Costs
Budgeted Cost
Variance
Direction
Direct material
$264,368
$248,000
$16,368
Unfavorable
Direct labor
204,352
$198,400
$5,952
Unfavorable
Variable overhead
107,310
$99,200
$8,110
Unfavorable
Fixed overhead
$73,904
$75,000
$1,096
Favorable
$649,934
$620,600
$29,334
Unfavorable
2.
a.
Direct materials price variance = $ 10,168 Unfavorable
Direct materials usage variance = Total direct material variance - Direct materials price variance
= $ 16,368 - $ 10,168 = $ 6,200 Unfavorable
b.
Actual labor hour worked for 24,800 units = 12,772
Actual labor hour worked per unit = 12,772/24,800 = 0.515 Hrs
Standard labor hours allowed for actual output (24.800 units) = 12,772 x (100% – 3%)
= 12,772 x 97 %
= 12,772 x 0.97 = 12,388.84 Hrs
Standard labor hours allowed per unit = 12,388.84/24,800 =0.49955 or 0.5 Hrs
Standard labor cost per unit = $ 8
Standard labor rate per hour = $ 8/0.49955 = $ 16.01441
Direct labor rate Variance = (Actual rate - Standard rate) × Actual hour
= Actual rate x Actual hours – Standard rate x Actual hours
= $ 204,352 - $ 16.01441 x 12,772 = $ 204,352 - $ 204,536.08
= $ 184.08 Favorable
c.
Direct labor usages Variance = (Actual hours - Standard hours) x Standard rate
= (12,772 - 12,388.84) x $ 16.01441
= 383.16 x $ 16.01441
= $ 6,136.08 Unfavorable
****Answered first four sub parts.
Ingles Company
Performance Report
Cost Item
Actual Costs
Budgeted Cost
Variance
Direction
Direct material
$264,368
$248,000
$16,368
Unfavorable
Direct labor
204,352
$198,400
$5,952
Unfavorable
Variable overhead
107,310
$99,200
$8,110
Unfavorable
Fixed overhead
$73,904
$75,000
$1,096
Favorable
$649,934
$620,600
$29,334
Unfavorable
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.