Details of this Paper

Two Accounting Problems Set

Description

solution


Question

Question;Problem 1Your Company, Inc. manufactures widgets. The company has not been meeting its projected net operating income. The contribution income statement for the month of April is shown below:BudgetedActualSales (20,000)$600,000$600,000Variable expensesVariable cost of goods sold1240,000261,122Variable selling expense27,00027,000Total variable expenses267,000288,122Contribution margin333,000311,878Fixed expensesManufacturing overhead175,000175,000Selling & administrative112,000112,000Total fixed expense287,000287,000Net operating income$ 46,000$ 24,878Based upon a review of the income statement, upper management has determined the major problem lies with variable cost of goods sold. The standard cost per widget is:Standard Quantity Standard PriceStandardor hoursor ratecostDirect Materials3.0 pounds$2.00/lb.$6.00Direct Labor0.8 hour$6.00/hr.4.80Variable Manufacturing Overhead0.4 hour$3.00/hr.1.20Total Standard Cost$12.0012Contains direct material, direct labor, and variable manufacturing overhead.Based on machine hours.Given: During the month of April:a] 20,000 units were produced.b] 65,000 pounds of material was purchased at a cost of $1.90 per pound.c] 65,000 pounds of material was usedthere were no beginning or ending inventories.d] 15,730 direct labor hours were worked at a cost of $7.20 per hour.e] $24,366 of variable manufacturing costs was incurred. A total of 7,860 machine hours was recorded. It is the policy to close all variances to cost of goods sold on a monthly basis.Required:1] Compute the following for the month of April:a) Direct materials price and quantity variances,b) Direct labor rate and efficiency variances, andc) Variable overhead rate and efficiency variances.2] Summarize the variances that you computed by showing the net favorable or unfavorable variance for the month. What impact did this figure have on the companys income statement? Please show your computations.3] Pick out the two most significant variances that you computed.Problem 2My Company, Inc. produces table cloths. The company has a standard cost system in use for its table cloths. The plant should work 3,000 hours to produce 2,000 type A table cloths. The standard costs for type A table cloths are:TotalPer table clothDirect materials$89,600$44.80Direct labor$18,0009.00Variable manufacturing overhead(based on direct labor hours) $ 7,5003.75Total$57.55During the month of April, the plant worked only 2,850 direct labor hours and produced2,200 type A table cloths. The following actual costs were recorded in April:TotalPer table clothDirect materials (12,010 yards) $95,480$43.40Direct labor$18,5258.42Variable manufacturing overhead $ 7,7003.50At standard, each table cloth should require 5.6 yards of material. All of the materials purchased during the month were used in production.Required:Compute the following for the month of April (ignore rounding errors):1] The direct materials price and quantity variances,2] The direct labor rate and efficiency variances, and3] The variable overhead rate and efficiency variances.

 

Paper#38993 | Written in 18-Jul-2015

Price : $26
SiteLock