13-36 Review of Chapter 13. (CPA, adapted) The Blazon Manufacturing Company\'s c
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13-36 Review of Chapter 13. (CPA, adapted) The Blazon Manufacturing Company's costing ystem 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 (DLH) At the beginning of 2013, Blazon adopted the folowing standards for lts manufacturing costs: Cost per Output Unit 20.00 56.00 Input Direct materials Direct manufacturing labor Manufacturing overhead 4 lbs. at $5 per Ib. hours at $14 per hour Variable Fixed $5 per DLH $9 per DLH 20.00 36.00 $132.00 Standard manufacturing cost per output unlt The denominator level for total manufacturing overhead per month in 2013 is 39,000 direct manufacturing labor-hours. Blazon's flexible budget for January 2013 was based on this denominator level. The records for January indicated the following: Direct materlals purchased Direct materials used Direct manufacturing labor Total actual manufacturing overhead (variable and fixed) Actual production 37,000 lb. at $4.90 per Ib. 34,000 lb. 31,600 hours at $14.10 per hour $650,000 8,400 output units 1. Prepare a schedule of total standard manufacturing costs for the 8,400 output units in January 2013. 2. For the month of January 2013, compute the following variances, indicating whether each is favorable or unfavorable (U: a. Direct materials price varlance, based on purchases b. Direct materials efficiency varlance c. Direct manufacturing labor price varlance d. Direct manufacturing labor efficiency variance e. Total manufacturing overhead spending variance t. Variable manufacturing overhead efficlency variance g. Production-volume varianceExplanation / Answer
Total Standard Manufacturing Cost Schedule.
Input used (A) ($)
Cost Per Input (B) $
Total Cost (C = A*B)
Direct Material
33,600 (8,400*4)
5
168.000
Direct Manufacturing Labor
33600 (84,00*4)
14
470.400
Manufacturing overhead
Variable
33600 (84.00*4)
5
168.000
Fixed
33600 (84.00*4)
10.45*
351000
Total
34.45
1,157,400
*Total Fixed Overhead = Level of manufacturing overhead *9=39,000*$9 =$351,000
*So overhead rate applied = Total Fixed overhead / Actual labor hours= $351,000/33,600=$10.4
a.Direct Material price Variance Purchase,
(Standard Price – Actual price)8 Actual units purchased.
($5-$4.90)37,000= $3,700 Favorable= (Because actual cost per unit is less than standard cost per unit)
b.Direct Material efficiency Variance
(Actual unit used –Standard units used for actual production)*Standard cost per unit
(34,000-33,600)*$5=$2,000 Unfavorable (Because actual units used is more than standard units it's treated Unfavorable
c.Direct Manufacturing Labor price Variance
(Standard Rate –Actual Rate)*Actual hours Used
($14-$14.10)$ 31,600 =$3,160 Unfavorable. (Unfavorable because actual rate is more than standard Rate.)
d.Direct Manufacturing Hours Efficiency Variance.
(Actual hours used – Standard Hours for actual output)*Standard Rate per hour.
(31,600-33,600)*$14 = $28,000 Favorable (Because Actual hours Are Less than Standard Hours.)
e.Total Manufacturing Overhead Spending Variance.
Actual total overhead = $650,000
Budgeted Fixed Overhead = $351,000 (39,000*$9)
Budgeted Variable overhead = Rate * Actual Applicable basis) = 5*31,600= $15,8000
So Total overhead Spending Variance = Actual total overhead – Budgeted Fixed Overhead - Budgeted Variable overhead)
=$650,000-$351,000-$158,000= $141,000 Unfavorable Since Actual is less Than Budgeted.
f.Variable Overhead Efficiency Variance.
(Actual hours – Standard Hours) Variable overhead Rate.
(31,600-33,600)*$5 =$10000 Unfavorable (Because Actual hours is More than Standard Hours)
g.Production Variance
Total Standard cost for Actual output – Total Actual cost for Actual output =
$1,157,400-$1,262,160 = $104,760 Unfavorable (since actual is greater than standard)
Input used (A) ($)
Cost Per Input (B) $
Total Cost (C = A*B)
Direct Material
33,600 (8,400*4)
5
168.000
Direct Manufacturing Labor
33600 (84,00*4)
14
470.400
Manufacturing overhead
Variable
33600 (84.00*4)
5
168.000
Fixed
33600 (84.00*4)
10.45*
351000
Total
34.45
1,157,400
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