Petrillo Company produces engine parts for large motors. The company uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products (a valve) is as follows: Direct materials (7 lbs @$5,4) $37,80 Direct labor (1,75 lbs @$18) $31,50 Variable overhead (1,75 lbs @$4) $7 Fixed overhead (1,75 lbs @$3) $5,25 Standard unit cost $81,55 During the year, Petrillo had the following activity related to valve production: a. Production of valves totaled 20,600 units. b. A total of 135,400 pounds of direct materials was purchased at $5.36 per pound. c. There were 10,000 pounds of direct materials in beginning inventory (carried at $5.40 per pound). There was no ending inventory. d. The company used 36,500 direct labor hours at a total cost of $656,270. e. Actual fixed overhead totaled $110,000. f. Actual variable overhead totaled $168,000. Petrillo produces all of its valves in a single plant. Normal activity is 20,000 units per year. Standard overhead rates are computed based on normal activity measured in standard direct labor hours. Required: 1. Compute the direct materials price and usage variances. 2. Compute the direct labor rate and efficiency variances. 3. Compute overhead variances using a two-variance analysis

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Topic Video
Question

Petrillo Company produces engine parts for large motors. The company uses
a standard cost system for production costing and control. The standard cost
sheet for one of its higher volume products (a valve) is as follows:

Direct materials (7 lbs @$5,4) $37,80

Direct labor (1,75 lbs @$18) $31,50

Variable overhead (1,75 lbs @$4) $7

Fixed overhead (1,75 lbs @$3) $5,25

Standard unit cost $81,55

During the year, Petrillo had the following activity related to valve production:
a. Production of valves totaled 20,600 units.
b. A total of 135,400 pounds of direct materials was purchased at $5.36
per pound.
c. There were 10,000 pounds of direct materials in beginning inventory
(carried at $5.40 per pound). There was no ending inventory.

d. The company used 36,500 direct labor hours at a total cost of $656,270.
e. Actual fixed overhead totaled $110,000.
f. Actual variable overhead totaled $168,000.
Petrillo produces all of its valves in a single plant. Normal activity is 20,000
units per year. Standard overhead rates are computed based on normal
activity measured in standard direct labor hours.

Required:
1. Compute the direct materials price and usage variances.
2. Compute the direct labor rate and efficiency variances.
3. Compute overhead variances using a two-variance analysis

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Costing Systems
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education