FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Petrillo Company produces engine parts for large motors. The company uses
a
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
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-
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