Question

Maple Leaf Production manufactures truck tires. The following information is available for the last operating period.

• Maple Leaf produced and sold 90,000 tires for $46 each. Budgeted production was 94,000 tires.
• Standard variable costs per tire follow:

Direct materials: 4 pounds at $3.00	$	12.00
Direct labor: 0.55 hours at $19.00		10.45
Variable production overhead: 0.23 machine-hours at $15 per hour		3.45
Total variable costs	$	25.90

• Fixed production overhead costs:

Monthly budget $1,380,000

• Fixed overhead is applied at the rate of $16 per tire.
• Actual production costs:

Direct materials purchased and used: 385,000 pounds at $1.80	$	693,000
Direct labor: 45,000 hours at $19.30		868,500
Variable overhead: 22,000 machine-hours at $15.30 per hour		336,600
Fixed overhead		1,396,000

Required:

a. Prepare a cost variance analysis for each of the variable costs for Maple Leaf Productions. (Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

	Direct Materials Direct Labor Variable Overhead Actual costs Actual inputs at standard price Flexible budget Price variance Efficiency variance Cost variance

b. Prepare a fixed overhead cost variance analysis. (Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

	Total fixed overhead cost variance

c. (Appendix) Prepare the journal entries to record the activity for the last period using standard costing. Assume that all variances are closed to cost of goods sold at the end of the operating period. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

B C 90000 А 1 a. Direct material: 2 Actual output Standard units per unit of output Standard units of material required for actual 4 output 3 b c=a*b 360000 Actual rate Actual cost 6 Standard quantity 7 SQ Standard rate SP 3,60,000.00 Actual Standard cost quantity SC AQ 10,80,000.00 3,85,000.00 AP AC 8 1.8 6,93,000.00 10 Total material cost/spending variance SQ*SP - AQ*AP 1080000-693000 387000 387000 F 15 Material price variance AQ*(SP-AP) 385000*(3-1.8) 462000 462000 F

20 Material usage quantity variance SP*(SQ-AQ) 3*(360000-385000) -75000 23 75000 U 24 25 Direct labor: 26 Particulars Amount 27 Standard hours per unit 0.55 28 Actual output 90000 29 Standard labor hours for actual output 49500 30 31 Standard Hours Standard rate Standard cost Actual Hours Actual rate Actual cost 32 SH SR SC AH AR АС 33 49,500.00 19 9,40,500.00 45,000.00 19.3 8,68,500.00 34 35 Labor cost variance 36 SC-AC 940500-868500 72,000.00 37 72000 F 39

40 Labor rate/Price variance AH*(SR-AR) 45000*(19-19.3) -13,500.00 13500 U 42 45 Labor efficiency variance 46 SR*(SH-AH) 19*(49500-45000) 85,500.00 85500 F F 48 49 Amount 50 Variable overhead: 51 Particulars 52 Standard hours per unit 53 Actual output 54 Standard labor hours for actual output 0.23 90000 20700 55 56 Standard Hours 57 SH Standard cost Actual cost Standard rate SR Actual Hours Actual rate AH AR SC |АС 20,700 L 3,10,500 22,000 3,10,500 22,000 15,3/3,356,600 15.3 3,36,600

VOH cost/Controllable variance SC-AC 310500-336600 -26100 26100 U 65 VOH rate variance AH*(SR-AR) 22000*(15-15.3) -66001 6600 U VOH efficiency variance SR*(SH-AH) 15*(20700-22000) -19500 19500 U 75 b. Fixed overhead: 76 TA Standard rate 77 Budgeted units 78 BU 79 Budgeted OH BC Overhead Actual Actual Actual Standard units Standard rate lapplied units rate cost SC AU AR AC 1380000 90000 1440000 90000 15.511|1396000| SR SU SR 86250 16 16

80 [1380000/16] 82 FOH cost variance 2 SC-AC 1440000-1396000 44000 44000 F 44UUU 445401 87 FOH cost volume variance SR*(SU-BU) 16*(90000-86250) 60000 60000 F FOH expenditure/ /spending variance BC-AC 1380000-1396000 -16000 16000 U

Credit 385000*3] 6,93,000 4,62,000 11,55,000 97 c. Jouranl: 98 Account Debit 99 Direct material inventory 11,55,000 100 Accounts payable 101 Direct material price variance 102 [Direct material purchases recorded at standard rate] 103 104 Direct material inventory 105 Direct material usage variance 75,000 106 Finished goods inventory 10,80,000 107 [Direct material transfer to finished goods] 108 109 Finished goods inventory 9,40,500 110 Direct labor rate variance 13,500 111 Direct labor efficiency variance 112 Wages payable 113 [Direct labor expenses and variances recorded] 114 115 Variable manufacturing overhead incurred 3,36,600 116 Accounts payable 117 [Recording variable overhead] 85,500 8,68,500 3,36,600

3,10,500 3,10,500 119 Finished goods inventory 120 Variable manufacturing overhead applied 121 [Variable manufacturing overhead applied] 122 123 Variable manufacturing overhead applied 124 Variable manufacturing overhead incurred 125 Variable m/f overhead rate variance 126 Variable m/f overhead efficiency variance 3,36,600 3,10,500 1 6,600 19,500 1396000 1396000 127 Recording variable overhead variances) 128 129 Fixed manufacturing overhead incurred 130 Accounts payable 131 [Recording Fixed overhead] 132 133 Finished goods inventory 134 Fixed manufacturing overhead applied 135 [Fixed manufacturing overhead applied] 136 137 Fixed manufacturing overhead applied 138 Fixed manufacturing overhead incurred 139 Fixed m/f volume variance 1440000 1440000 1440000 1396000 600000

16000 140 Fixed m/f overhead expenditure variance 141 [Recording Fixed overhead variances] 142 143 Finished goods inventory 144 Cost of goods sold 145 [Transfer of finished goods to cost of goods sold] 37,71,000 37,71,000 146 4,62,000 75,000 13,500 85,500 147 Direct material price variance 148 Direct material usage variance 149 Direct labor rate variance 150 Direct labor efficiency variance 151 Variable m/f overhead rate variance 152 Variable m/f overhead efficiency variance 153 Fixed m/f volume variance 154 Fixed m/f overhead expenditure variance 155 Cost of goods sold 6,600 19,500 60,000 16,000 4,76,900