Question

Containers, Inc. produced 62.500 and sold 59.000 plastic microcomputer cases at a selling price of $10.00 each. Manufacturing overhead is allocated on the basis of machine hours. The standard variable costs per computer case were: Quantity Rate Total Direct Materials 1.5 kg $ 1.20 per kg $1.80 Direct Labour 0.50 labour hours $15.00 per hour 7.50 Variable Overhead 0.20 machine hours $6.00 per hour 1.20 Information regarding fixed overhead includes the following: Budgeted Fixed Overhead: Denominator Used: Budgeted Production Volume: Standard Machine Hours/Unit: Total Budgeted Machine Hours: $337,500 Total Budgeted Direct Machine Hours 50,000 units 0.20 machine hours @$ 1.21 per ke Data on Actual Costs and Quantities: Direct material purchased Direct material used Direct labour incurred Machine Hours used Fixed Overhead Costs Variable Overhead Costs 103,125 kg 91,900 kg 30,300 hours 12,000 hours $340,200 $81,000 @ $ 14.70 per hour ??? 6.75 All inventory accounts had zero beginning balances. All of the work started this period was completed in the period. REQUIRED: Part 1 1. Prepare a standard cost card for one microcomputer case. 2. Calculate these variances: DM Price and Efficiency, DL Price (Rate) and Efficiency, 3. Journalize the following transactions: a. DM purchase, including any related variances) b. DM requisitioned to production, including any related variance(s) c Labour costs incurred, including any related variance(s) Part II 4. Calculate these variances: Variable Overhead Spending and Efficiency, and Fixed Overhead Spending and Production Volume Variances. 5. Journalize the following transactions: a. Actual variable overhead costs incurred b. Actual fixed overhead costs incurred C. The allocation of variable overhead to production d. The allocation of fixed overhead to production e. The isolation of variable overhead variances o f. The isolation of fixed overhead variances 6. Prepare the journal entry to close out all of the variance accounts, assuming that all variances are immediately expensed to cost of Goods Sold (and not prorated among the inventory accounts

please full calculation and explanations

Answer 1

Answer :

Part (1)

(1) Standard cost card - one micro computer case - container Inc.
Direct material	1.5	Kg	$1.20	Per Kg	$1.80
Direct Labor	0.5	DLHs at	$15.00	Per DLH	$7.50
Variable overhead	0.2	Machine hour at	$6.00	Per MH	$1.20
Fixed overhead	0.2	Machine hour at	$33.75	Per MH	$6.75
Standard cost per unit					$17.25
Fixed overhead per machine hour = 337500/(50000*0.20)=$33.75

(2)

DM Price Variance= ( Std Price - Actual Price) X Actual Quantity

( 1.20-1.21)X 103125= $1031.25 Unfavorable

DM Efficiency Variance= ( Std Qty- Actual Qty) X price

(( 62500X1.5)-91900)X1.20= $2220 Favorable

D labor Rate Variance= ( Std Rate - Actual Rate) X Actual Hour

(15-14.70)X 30300= $9090 favorable

DL Efficiency Variance= ( Std Hour- Actual Hour) X Std Rate

(( 62500X0.5)-30300)X15= $14250 Favorable

(3) Journal Entries
S.No.	Account Title	Debit	Credit
1.	Direct material - inventory	$123,750
	Direct material price variance	$1,031
	Account payable (103125*1.21)		$124,781
2.	Direct material used (62500*1.5*1.20)	$1,125,009
	Direct material Efficiency variance		$2,220
	Direct material - Inventory (91900*1.20)		$110,280
3.	Direct labor (62500*0.50*15)	$468,750
	Direct labor rate variance		$9,090
	Direct labor efficiency variance		$14,250
	Account payable (30300*14.70)		$445,410