Problem 2 (Comprehensive Variance Analysis; Journal Entries) Moda Mills, Inc., is a large producer of men's and women's clothing. The company uses standard costs for all of its products. The standard costs and actual costs for a recent period are given below for one of the company's product lines (per unit of product): Standard Cost Actual Cost Direct materials: Standard: 4.0 yards at P3.60 per yard... Actual: 4.4 yards at P3..35 per yard... P14.40 P14.74 Direct labor: Standard: 1.6 hours at P4.50 per hour.. Actual: 1.4 hours at P4.85 per Variable manufacturing overhead: Standard: 1.6 hours at P1.80 per hour..... Actual: 1.4 hours at P2.15 per Total cost per unit...... 7.20 hour.. 6.79 2.88 hour .. 3.01 P24.54 P24.48 360 Chapter 10 During the period, the company produced 4,800 units of product. A comparison of standard and actual costs for the period on a total cost basis is shown below: P117,792 117.504 P 288 Actual costs: 4,800 units at P24.54... Standard costs: 4,800 units at P24.48 .... Difference in cost - unfavorable .. .. There was no inventory of materials on hand to start the period. During the period, 21,120 yards of materials were purchased, all of which were used in production. Required: 1. For direct materials: a. Compute the price and quantity variances for the period. b. Prepare journal entries to record all activity relating to direct materials for the period. For direct labor: 2. Compute the rate and efficiency variances. b. Prepare a journal entry to record the incurrence of direct labor for the period. a. 3. Compute the variable manufacturing overhead spending and efficiency variances. 4. On seeing the P288 total cost variance, the company's president stated, "This variance of P288 is only 0.2 % of the P117,504 standard cost for the period. It's obvious that our costs are well under control." Do you agree? Explain. State possible causes of each variance that you have computed.. 5.
Problem 2 (Comprehensive Variance Analysis; Journal Entries) Moda Mills, Inc., is a large producer of men's and women's clothing. The company uses standard costs for all of its products. The standard costs and actual costs for a recent period are given below for one of the company's product lines (per unit of product): Standard Cost Actual Cost Direct materials: Standard: 4.0 yards at P3.60 per yard... Actual: 4.4 yards at P3..35 per yard... P14.40 P14.74 Direct labor: Standard: 1.6 hours at P4.50 per hour.. Actual: 1.4 hours at P4.85 per Variable manufacturing overhead: Standard: 1.6 hours at P1.80 per hour..... Actual: 1.4 hours at P2.15 per Total cost per unit...... 7.20 hour.. 6.79 2.88 hour .. 3.01 P24.54 P24.48 360 Chapter 10 During the period, the company produced 4,800 units of product. A comparison of standard and actual costs for the period on a total cost basis is shown below: P117,792 117.504 P 288 Actual costs: 4,800 units at P24.54... Standard costs: 4,800 units at P24.48 .... Difference in cost - unfavorable .. .. There was no inventory of materials on hand to start the period. During the period, 21,120 yards of materials were purchased, all of which were used in production. Required: 1. For direct materials: a. Compute the price and quantity variances for the period. b. Prepare journal entries to record all activity relating to direct materials for the period. For direct labor: 2. Compute the rate and efficiency variances. b. Prepare a journal entry to record the incurrence of direct labor for the period. a. 3. Compute the variable manufacturing overhead spending and efficiency variances. 4. On seeing the P288 total cost variance, the company's president stated, "This variance of P288 is only 0.2 % of the P117,504 standard cost for the period. It's obvious that our costs are well under control." Do you agree? Explain. State possible causes of each variance that you have computed.. 5.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 2 (Comprehensive Variance Analysis; Journal Entries)
Moda Mills, Inc., is a large producer of men's and women's clothing. The
company uses standard costs for all of its products. The standard costs and
actual costs for a recent period are given below for one of the company's
product lines (per unit of product):
Standard Cost
Actual Cost
Direct materials:
Standard: 4.0 yards at P3.60 per yard...
Actual: 4.4 yards at P3..35 per yard...
P14.40
P14.74
Direct labor:
Standard: 1.6 hours at P4.50 per hour..
Actual: 1.4 hours at P4.85 per
Variable manufacturing overhead:
Standard: 1.6 hours at P1.80 per hour.....
Actual: 1.4 hours at P2.15 per
Total cost per unit......
7.20
hour..
6.79
2.88
hour ..
3.01
P24.54
P24.48
Transcribed Image Text:360 Chapter 10
During the period, the company produced 4,800 units of product. A
comparison of standard and actual costs for the period on a total cost basis is
shown below:
P117,792
117.504
P 288
Actual costs: 4,800 units at P24.54...
Standard costs: 4,800 units at P24.48 ....
Difference in cost - unfavorable .. ..
There was no inventory of materials on hand to start the period. During the
period, 21,120 yards of materials were purchased, all of which were used in
production.
Required:
1. For direct materials:
a. Compute the price and quantity variances for the period.
b. Prepare journal entries to record all activity relating to direct
materials for the period.
For direct labor:
2.
Compute the rate and efficiency variances.
b.
Prepare a journal entry to record the incurrence of direct labor for the
period.
a.
3. Compute the variable manufacturing overhead spending and efficiency
variances.
4. On seeing the P288 total cost variance, the company's president stated,
"This variance of P288 is only 0.2 % of the P117,504 standard cost for
the period. It's obvious that our costs are well under control." Do you
agree? Explain.
State possible causes of each variance that you have computed..
5.
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