Question

McKnight manufactures coffee mugs that it sells to other companies for customizing with theirown logos McKnight prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 60,200 coffee mugs per month EEB (Click the icon to view the cost data.) Requ i Data Table Begi erials a cost $ 0.05 Direct Materials 0.2 lbs 0.25 per lb) Direct Labor 3 minutes@ S 0.13 per minute) 0.39 Dir Manufacturing Overhead Dir ariable 3 minutes@ 0.04 per minute) 0.12 0.45 0.57 Fixed 3 minutes S 0.15 per minute) $ 1.01 Total Cost per Coffee Mug Print Done Ch Actual cost and production information for July 2018 follows (Click the icon to view actual cost and production information.) -X More Info There were no beginning or ending inventory balances. All expenditures were on a. account b. Actual production and sales were 62,900 coffee mugs. c. Actual direct materials usage was 10,000 lbs. at an actual cost of S0.17 per lb. d. Actual direct labor usage was 202,000 minutes at a total cost of $30,300. Actual overhead cost was $6,060 variable and $34,340 fixed. e. f. Selling and administrative costs were $131,000. Print Done Requirements 1. C ompute the cost and efficiency variances for direct materials and direct labor 2. Journalize the purchase and usage of direct materials and the assignment of direct labor, including the related variances 3. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances 4. Journalize the actual manufacturing overhead and the allocated manufacturing overhead. Journalize the movement of all production costs from Work-in-Process Inventory. Journalize the adjusting of the Manufacturing Overhead account 5. McKnight intentionally hired more highly skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise?

Answer 1

I have answered the first three ones.Post the rest two separately .

1	The variances relating to material and labor is calculated as under			4
	Material Price Variance	(AP-SP)*AQ
		($.17-.25)*10000
		$800 F
	Material Efficiency Variance	(AQ-SQ)*SP
		(10000-62900*.2)*.25
		(10000-12580)*.25
		645 F
	Direct Labor Price Variance	(AP-SP)*AH
		(30300/202000-.13)*202000
		(.15-.13)*202000
		4040 U
	Direct Labor Efficiency Variance	(AH-SH)*SP
		(202000-62900*3)*.13
		1729 U
2		Journal Entry
Date	Account Title	Debit-$	Credit-$
	Material -10000*.25	2500
	Direct Material Price var		800
	Accounts Payable		1700
	10000*.17
	WIP Inventory-12580*.25	3145
	Direct Material Efficiency Var		645
	Material Inventory-10000*.25		2500
	Manufacturing wage-202000*.13	26260
	Direct Labor price Var	4040
	Wage payable-202000*.15		30300
	WIP inventory-188700*.13	24531
	Direct Labor Eff Var	1729
	Wage payable-202000*.13		26260
3	Variable OH Spending Var	(AP*AH)-(SP*AH)
		6060-(.04*202000)
		6060-8080
		2020 F
	Variable OH Efficiency Var	(AH-SH)*SP
		(202000-62900*3)*.04
		532 U
	Fixed OH Spending Var	Actual FOH-Budgeted FOH
		34340-62900*3*.15)
		6035 U
	Fixed OH Vol Var	Budgeted FOH-Applied FOH
		28305-(3*60200*.15)
		28305-27090
		1215 U