Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 7, Problem 7.28E
Direct materials and direct manufacturing labor variances. Rugged Life, Inc., designs and manufactures fleece quarter-zip jackets. It sells its jackets to brand-name outdoor outfitters in lots of one dozen. Rugged Life’s May 2017 static budget and actual results for direct inputs are as follows:
| Static Budget | |
| Number of jacket lots (1 lot = 1 dozen) | 300 |
| Per Lot of Jackets: | |
| Direct materials | 18 yards at $4.65 per yard = $83.70 |
| Direct manufacturing labor | 2.4 hours at $12.50 per hour = $30.00 |
| Actual Results | |
| Number of jacket lots sold | 325 |
| Total Direct Inputs: | |
| Direct materials | 6,500 yards at $4.85 per yard = $31,525 |
| Direct manufacturing labor | 715 hours at $12.60 = $9,009 |
Rugged Life has a policy of analyzing all input variances when they add up to more than 8% of the total cost of materials and labor in the flexible budget, and this is true in May 2017. The production manager discusses the sources of the variances: “A new type of material was purchased in May. This led to faster cutting and sewing, but the workers used more material than usual as they learned to work with it. For now, the standards are fine.”
- 1. Calculate the direct materials and direct manufacturing labor price and efficiency variances in May 2017. What is the total flexible-
budget variance for both inputs (direct materials and direct manufacturing labor) combined? What percentage is this variance of the total cost of direct materials and direct manufacturing labor in the flexible budget? - 2. Comment on the May 2017 results. Would you continue the “experiment” of using the new material?
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Safeflower Systems allocates manufacturing overhead based on machine hours.
Each connector should require 13 machine hours. According to the static budget,
Safeflower expected to incur the following:
(Click the icon to view the static budget information.)
During August, Safeflower actually used 500 machine hours to make 86 connectors
and spent $5,300 in variable manufacturing costs and $9,100 in fixed manufacturing
overhead costs. Calculate the variable overhead cost variance for Safeflower.
A. $290 F
OB. $2,800 U
OC. $5,890 F
O-D. $3,090 F
Data Table
1,300 machine hours per month (100 connectors x 13 machine hours per
connector)
$6,500 in variable manufacturing overhead costs
$7,535 in fixed manufacturing overhead costs
Print
Done
X
Radiant Systems allocates manufacturing overhead based on machine hours. Each connector should require 13 machine hours. According to the static budget, Radiant expected to incur
the following
(Click the icon to view the static budget Information.)
During August, Radiant actually used 400 machihe hours to make 130 connectors and spent $5,500 in variable manufacturing costs and $9,100 in fixed manufacturing overhead costs.
Calculate the variable overhead cost variance for Radiant
OA. $2,850 F
OB. $6,450 F
Data table
Oc. $9,950 F
OD. $3,500 U
1,300 machine hours per month (100 connectors x 13 machine hours per
connector
$6,500 in variable manufacturing overhead costs
$7,535 in fixed manufacturing overhead costs
Print
Done
- X
Safeflower Systems allocates manufacturing overhead based on machine hours. Each connector should require 10 machine hours. According to the static budget, Safeflower Systems expected to
incur the following:
View the static budget information.
During August, Safeflower Systems actually used 400 machine hours to make 92 connectors and spent $5,500 in variable manufacturing costs and $7,800 in fixed manufacturing overhead costs.
Calculate the variable overhead cost variance for Safeflower Systems.
OA. $6,850 F
O B. $5,850 F
OC. $1,000 U
OD. $4,850 F
Static Budget
400 machine hours per month (40 connectors x 10 machine hours per connector)
$4,500 in variable manufacturing overhead costs
$6,210 in fixed manufacturing overhead costs
Print
Done
-
Chapter 7 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 7 - What is the relationship between management by...Ch. 7 - What are two possible sources of information a...Ch. 7 - Distinguish between a favorable variance and an...Ch. 7 - What is the key difference between a static budget...Ch. 7 - Why might managers find a flexible-budget analysis...Ch. 7 - Describe the steps in developing a flexible...Ch. 7 - List four reasons for using standard costs.Ch. 7 - How might a manager gain insight into the causes...Ch. 7 - List three causes of a favorable direct materials...Ch. 7 - Describe three reasons for an unfavorable direct...
Ch. 7 - How does variance analysis help in continuous...Ch. 7 - Why might an analyst examining variances in the...Ch. 7 - Prob. 7.13QCh. 7 - When inputs are substitutable, how can the direct...Ch. 7 - Benchmarking against other companies enables a...Ch. 7 - Metal Shelf Companys standard cost for raw...Ch. 7 - All of the following statements regarding...Ch. 7 - Amalgamated Manipulation Manufacturings (AMM)...Ch. 7 - Atlantic Company has a manufacturing facility in...Ch. 7 - Basix Inc. calculates direct manufacturing labor...Ch. 7 - Flexible budget. Sweeney Enterprises manufactures...Ch. 7 - Flexible budget. Bryant Companys budgeted prices...Ch. 7 - Flexible-budget preparation and analysis. Bank...Ch. 7 - Flexible budget, working backward. The Clarkson...Ch. 7 - Flexible-budget and sales volume variances....Ch. 7 - Price and efficiency variances. Sunshine Foods...Ch. 7 - Materials and manufacturing labor variances....Ch. 7 - Direct materials and direct manufacturing labor...Ch. 7 - Price and efficiency variances, journal entries....Ch. 7 - Materials and manufacturing labor variances,...Ch. 7 - Journal entries and T-accounts (continuation of...Ch. 7 - Price and efficiency variances, benchmarking....Ch. 7 - Static and flexible budgets, service sector....Ch. 7 - Flexible budget, direct materials, and direct...Ch. 7 - Variance analysis, nonmanufacturing setting. Joyce...Ch. 7 - Comprehensive variance analysis review. Ellis...Ch. 7 - Possible causes for price and efficiency...Ch. 7 - Material-cost variances, use of variances for...Ch. 7 - Direct manufacturing labor and direct materials...Ch. 7 - Direct materials efficiency, mix, and yield...Ch. 7 - Direct materials and manufacturing labor...Ch. 7 - Direct materials and manufacturing labor...Ch. 7 - Use of materials and manufacturing labor variances...Ch. 7 - Direct manufacturing labor variances: price,...Ch. 7 - Direct-cost and selling price variances. MicroDisk...Ch. 7 - Variances in the service sector. Derek Wilson...Ch. 7 - Prob. 7.47P
Knowledge Booster
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
- Firenza Company manufactures specialty tools to customer order. Budgeted overhead for the coming year is: Previously, Sanjay Bhatt, Firenza Companys controller, had applied overhead on the basis of machine hours. Expected machine hours for the coming year are 50,000. Sanjay has been reading about activity-based costing, and he wonders whether or not it might offer some advantages to his company. He decided that appropriate drivers for overhead activities are purchase orders for purchasing, number of setups for setup cost, engineering hours for engineering cost, and machine hours for other. Budgeted amounts for these drivers are 5,000 purchase orders, 500 setups, and 2,500 engineering hours. Sanjay has been asked to prepare bids for two jobs with the following information: The typical bid price includes a 40 percent markup over full manufacturing cost. Required: 1. Calculate a plantwide rate for Firenza Company based on machine hours. What is the bid price of each job using this rate? 2. Calculate activity rates for the four overhead activities. What is the bid price of each job using these rates? 3. Which bids are more accurate? Why?arrow_forwardCold X, Inc. uses this information when preparing their flexible budget: direct materials of $2 per unit, direct labor of $3 per unit, and manufacturing overhead of $1 per unit. Fixed costs are $35,000. What would be the budgeted amounts for 20,000 and 25,000 units?arrow_forwardRefer to Cornerstone Exercise 8.13. In March, Nashler Company produced 163,200 units and had the following actual costs: Required: 1. Prepare a performance report for Nashler Company comparing actual costs with the flexible budget for actual units produced. 2. What if Nashler Companys actual direct materials cost were 1,175,040? How would that affect the variance for direct materials? The total cost variance?arrow_forward
- Salisbury Bottle Company manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows: At the beginning of March, Salisburys management planned to produce 500,000 bottles. The actual number of bottles produced for March was 525,000 bottles. The actual costs for March of the current year were as follows: a. Prepare the March manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for Salisbury, assuming planned production. b. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for March. c. Interpret the budget performance report.arrow_forwardVariable manufacturing overhead, variance analysis. Esquire Clothing is a manufacturer of designer suits. The cost of each suit is the sum of three variable costs (direct material costs, direct manufacturing labor costs, and manufacturing overhead costs) and one fixed-cost category (manufacturing overhead costs). Variable manufacturing overhead cost is allocated to each suit on the basis of budgeted direct manufacturing labor-hours per suit. For June 2017, each suit is budgeted to take 4 labor-hours. Budgeted variable manufacturing overhead cost per labor-hour is $12. The budgeted number of suits to be manufactured in June 2017 is 1,040. Actual variable manufacturing costs in June 2017 were $52,164 for 1,080 suits started and completed. There were no beginning or ending inventories of suits. Actual direct manufacturing labor-hours for June were 4,536.arrow_forwardTempus, Inc. manufactures clocks and uses a standard costing system. Tempus uses direct labor-hours to allocate fixed overhead. Here are the company's data regarding budgeted and actual fixed overhead for 2020: Actual Static Budget Output (in units = clocks) 500,000 units 480,000 units Total direct labor hours (DLH) 240,000 DLH Total fixed overhead costs $756,000 $720,000 A. Calculate all fixed overhead variances and any overapplied or underapplied fixed overhead. Show all answers and well-labeled supporting calculations on the worksheet. B. Record journal entries for all fixed overhead activity for the year, including recording the variances and the required closing journal entries at year-end. Use the blank general journal on page 3 of the worksheet.arrow_forward
- Ruth Dee, Inc. designs and manufactures fleece quarter-zip jackets. It sells its jackets to brand-name outdoor outfitters in lots of one dozen. Ruth Dee's May 2017 static budget and actual results for direct inputs are as follows: Static Budget Number of jacket lots (1 lot = 1 dozen) 400 Per Lot of Jackets: Direct materials 14 yards at $1.40 per yard = $19.60 Direct manufacturing labor 1.5 hours at $8.50 per hour = $12.75 Actual Results Number of jacket lots sold 425 Total Direct Inputs: Direct materials 6,800 yards at $1.60 per yard = $10,880.00 Direct manufacturing labor 553 hours at $8.60 per hour = $4,755.80 Ruth Dee has a policy of analyzing all input variances when they add up to more than 8% of the total cost of materials and labor in the flexible budget, and this is true in May 2017. The production manager discusses the sources of the variances: "A new type of material was purchased in May. This led to faster cutting and sewing, but the workers used more material than…arrow_forwardCool Car Motors assembles and sells motor vehicles and uses standard costing. Actual data relating to April and May 2018 are provided. (Click to view the data.) The selling price per vehicle is $28,000. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 500 units. There are no price, efficiency, or rate variances. Any production-volume variance is written off to COGS in the month in which it occurs. Required 1. Prepare April and May 2018 statements of comprehensive income for Cool Car Motors under (a) variable costing and (b) absorption costing. 2. Prepare a numerical reconciliation and explanation of the difference between operating income for each month under variable costing and absorption costing. Requirement 1a. Prepare April and May 2018 statements of comprehensive income for Cool Car Motors under variable costing. Complete the top half of the statement of comprehensive income for each month first, and then complete the bottom…arrow_forwardFlexible budget, direct materials, and direct manufacturing labor variances. Emerald Statuary manufactures bust statues of famous historical figures. All statues are the same size. Each unit requires the same amount of resources. The following information is from the static budget for 2017: Expected production and sales 7000 units Expected selling price per unit $680 Total fixed costs $1,400,000 Standard quantities, standard prices, and standard unit costs follow for direct materials and direct manufacturing labor: Standard Quantity Standard Price Standrad Unit Cost Direct Materials 10 Pounds $8 per pound $80.00 Direct Manufacturing Labor 3.7 Hours…arrow_forward
- Lightsey Natural Dying Corporation measures its activity in terms of skeins of yarn dyed. Last month, the budgeted level of activity was 14,800 skeins and the actual level of activity was 15,100 skeins. The company's owner budgets for dye costs, a variable cost, at $0.51 per skein. The actual dye cost last month was $8,660. What would have been the spending variance for dye costs? Multiple Choice O O O $172 U $1,112 U $959 U $153 Uarrow_forwardOverhead variances and sales-volume variance. The Roller Bag Company manufactures extremely light and rolling suitcases. It was one of the first companies to produce rolling suitcases and sales have increased for the past several years. In 2017, Roller Bag budgeted to sell 150,000 suitcases for $80 each. The budgeted standard machine hours for production in 2017 were 375,000 machine hours. Budgeted fixed overhead costs are $525,000, and variable overhead cost was budgeted at $1.75 per machine-hour. In 2017, Roller Bag experienced a drop in sales due to increased competition for rolling suitcases. Roller Bag used 310,000 machine-hours to produce the 120,000 suitcases it sold in 2017. Actual variable overhead costs were $488,000 and actual fixed overhead costs were $532,400. The average selling price of the suitcases sold in 2017 was $72. Actual direct materials and direct labor costs were the same as standard costs, which were $20 per unit and $18 per unit, respectively.arrow_forwardDirect manufacturing labor variances: price, efficiency, mix, and yield. Elena Martinez employs two workers in her wedding cake bakery. The rst worker, Gabrielle, has been making wedding cakes for 20 years and is paid $25 per hour. The second worker, Joseph, is less experienced and is paid $15 per hour. One wedding cake requires, on average, 6 hours of labor. The budgeted direct manufacturing labor quantities for one cake are as follows:arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY