Principles of Cost Accounting
17th Edition
ISBN: 9781305087408
Author: Edward J. Vanderbeck, Maria R. Mitchell
Publisher: Cengage Learning
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Chapter 8, Problem 3P
Zippy Inc. manufactures a fuel additive, Surge, which has a stable selling price of $44 per drum. The company has been producing and selling 80,000 drums per month.
In connection with your examination of Zippy’s financial statements for the year ended September 30, management has asked you to review some computations made by Zippy’s cost accountant. Your working papers disclose the following about the company’s operations:
Materials:
Costs and expenses during September:
Chemicals: 645,000 gallons purchased at a cost of $1,140,000; 600,000 gallons used.
Empty drums: 94,000 purchased at a cost of $94,000; 80,000 drums used.
Direct labor: 81,000 hours worked at a cost of $816,480. Factory
Required:
Calculate the following for September, using the formulas on pages 421–422 and 424 (Round unit costs to the nearest whole cent and compute the materials variances for both Surge and for the drums.):
- 1. Materials quantity variance.
- 2. Materials purchase price variance.
- 3. Labor efficiency variance.
- 4. Labor rate variance.
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Zippy Inc. manufactures a fuel additive, Surge, which has a stable selling price of $44 per drum. The company has been producing and selling 80,000 drums per month.
In connection with your examination of Zippy's financial statements for the year ended September 30, management has asked you to review some computations made by Zippy's cost
accountant. Your working papers disclose the following about the company's operations: Standard costs per drum of product manufactured:
Materials:
8 gallons of chemicals @ $2.
$16
1 empty drum.
$17
Direct labor-1 hour.
$10
Factory Overhead.
$ 6
Costs and expenses during September:
Chemicals: 645,000 gallons purchased at a cost of $1,140,000; 600,000 gallons used.
Empty drums: 94,000 purchased at a cost of $94,000; 80,000 drums used.
Direct labor: 81,000 hours worked at a cost of $816,480. Factory overhead: $768,000.
REQUIRED:
Calculate the following for September, using the formulas in Determination of Variances on pages 421–422 and 424 (Round unit…
Peter Ltd manufactures and sells batteries. The cost data for the product are given below. The accountant told the President that he will prepare two different sets of income statements for thePresident’s review. The data are given as follows:
Variable cost:
Direct materials $6Direct labor $12Variable overhead $4Variable selling and administrative $3
Fixed cost per month:
Fixed manufacturing overhead $240,000Fixed selling and administrative $180,000
The batteries sell for $40 per unit. Production and sales data for January are shown below.
Units produced 30,000Units sold 26,000
Required:a. Prepare the absorption costing income statement.b. Prepare the variable costing income statement.c. Explain to the President the differences between the two income statements (if any) and the net income figures he should rely on.
The following information pertains to the first year of operation for Crystal Cold Coolers Inc.:
Number of units produced
Number of units sold
Unit sales price
Direct materials per unit
Direct labor per unit
Variable manufacturing overhead per unit
Fixed manufacturing overhead per unit ($224,000/2,800 units)
Total variable selling expenses ($11 per unit sold)
Total fixed general and administrative expenses
Complete this question by entering your answers in the tabs below.
Required:
Prepare Crystal Cold's full absorption costing income statement and variable costing income statement for the year.
Full Absorption
Costing
2,800
2,400
340
60
45
13
80
Variable
Costing
$ 26,400
$ 60,000
Chapter 8 Solutions
Principles of Cost Accounting
Ch. 8 - How does a standard cost accounting system work,...Ch. 8 - What is the difference between the standard cost...Ch. 8 - Prob. 3QCh. 8 - What are the specific procedures on which a...Ch. 8 - How are standards for materials and labor costs...Ch. 8 - What is a variance?Ch. 8 - How do price and quantity variances relate to...Ch. 8 - How do rate and efficiency variances relate to...Ch. 8 - Prob. 9QCh. 8 - How does a materials purchase price variance...
Ch. 8 - Prob. 11QCh. 8 - Prob. 12QCh. 8 - When a company uses a standard cost system, are...Ch. 8 - What two factors must be considered when breaking...Ch. 8 - What might cause the following materials...Ch. 8 - What might cause the following labor variances?
An...Ch. 8 - Prob. 17QCh. 8 - Prob. 18QCh. 8 - Prob. 19QCh. 8 - Prob. 20QCh. 8 - When does a flexible-budget variance occur?
Ch. 8 - Why is it important to determine flexible-budget...Ch. 8 - Prob. 23QCh. 8 - What is the significance of a production-volume...Ch. 8 - If production is more or less than the standard...Ch. 8 - At the end of the current fiscal year, the trial...Ch. 8 - What variances from the four-variance method are...Ch. 8 - What is the primary difference between the...Ch. 8 - What are the four variances in the four-variance...Ch. 8 - In all of the exercises involving variances, use F...Ch. 8 - Prob. 2ECh. 8 - Prob. 3ECh. 8 - Prob. 4ECh. 8 - Prob. 5ECh. 8 - Computing materials variances D-List Calendar Co....Ch. 8 - Computing labor variances LIFT Inc. manufactures...Ch. 8 - Standard cost summary; materials and labor cost...Ch. 8 - Computing labor variances Fill in the missing...Ch. 8 - Standard unit cost and journal entries The normal...Ch. 8 - Making journal entries Assume that during the...Ch. 8 - Using variance analysis and interpretation Last...Ch. 8 - Using variance analysis and interpretation Last...Ch. 8 - Journalizing standard costs in two departments...Ch. 8 - Calculating factory overhead The standard capacity...Ch. 8 - Determining Budgeted Overhead The overhead...Ch. 8 - Calculating factory overhead: two variances Munoz...Ch. 8 - Calculating factory overhead: two variances...Ch. 8 - The normal capacity of a manufacturing plant is...Ch. 8 - Calculating amount of factory overhead applied to...Ch. 8 - Georgia Gasket Co. budgets 8,000 direct labor...Ch. 8 - (Appendix) Calculating factory overhead: four...Ch. 8 - (Appendix) Calculating factory overhead: three...Ch. 8 - Materials and labor variances Branca Inspections...Ch. 8 - Materials and labor variances Fausto Fabricators...Ch. 8 - Zippy Inc. manufactures a fuel additive, Surge,...Ch. 8 - Calculation of materials and labor variances
Fritz...Ch. 8 - High-End Products Inc. uses a standard cost system...Ch. 8 - RDI Products Co. manufactures a variety of...Ch. 8 - The standard cost summary for the most popular...Ch. 8 - Carlo Lee Corp. has established the following...Ch. 8 - USD Inc. has established the following standard...Ch. 8 - Allocation of variances
Costa Brava Manufacturing...Ch. 8 - On May 1, Athens Inc. began the manufacture of a...Ch. 8 - The standard specifications for an electric motor...Ch. 8 - Cardiff Inc. manufactures men’s sport shirts for...Ch. 8 - Fargo Co. manufactures products in batches of 100...Ch. 8 - Prob. 15PCh. 8 - (Appendix) Overhead variances—four variance
Mobile...Ch. 8 - Shinto Corp. uses a standard cost system and...Ch. 8 - Kamen Manufacturing Co. estimates the following...Ch. 8 - Prob. 19PCh. 8 - Jillian Manufacturing Inc. manufactures a single...Ch. 8 - Cost and production data for Binghamton Beverages...
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