E25-2 Compute Standard Materials Costs: Instructions
E25-2 Compute Standard Materials Costs: Instructions
E25-2 Compute Standard Materials Costs: Instructions
Hank Itzek manufactures and sells homemade wine, and he wants to develop a standard cost
per gallon. The following are required for production of a 50-gallon batch.
Hank estimates that 4% of the grape concentrate is wasted, 10% of the sugar is lost, and 25%
of the lemons cannot be used.
Instructions
Compute the standard cost of the ingredients for one gallon of wine. (Carry computations to
two decimal places.)
NOTE: Enter a number in cells requesting a value; enter either a number or a form
After you have completed the requirements of E25-2, consider this additional question.
1. Assume the standard waste for grape concentrate, sugar and lemons changed to 5%,
How will these changes impact the standard cost of one gallon of wine?
ts to develop a standard cost
on batch.
? $0.06 ?
? 0.30 ?
? 0.60 ?
? 0.25 ?
? 0.20 ?
? 0.005 ?
question.
and lemons changed to 5%, 8% and 20% respectively.
gallon of wine?
E25-5 Compute materials price and quantity variance
The standard cost of Product B manufactured by MIT Company includes three units of direct m
$5.00 per unit. During June, 29,000 units of direct materials are purchased at a cost of $4.70
29,000 units of direct materials are used to produce 9,500 units of Product B.
Instructions
(a) Compute the total materials variance and the price and quantity variances.
(b) Repeat (a), assuming the purchase price is $5.15 and the quantity purchased and used is
NOTE: Enter a number in cells requesting a value; enter either a number or a form
After you have completed the requirements of E25-5, consider this additional question.
1. Assume the purchase price of direct materials changed to $4.80 and the quantity purc
and used also changed to 30,000 units. Recalculate total materials variance and pric
quantity variances.
udes three units of direct materials at
rchased at a cost of $4.70 per unit, and
Product B.
ty variances.
tity purchased and used is 28,000 units
her a number or a formula in cells with a "?" .
SP )
Value )
SP )
Value )
SP )
Value )
SP )
Value )
SP )
Value )
SP )
Value )
additional question.
$4.80 and the quantity purchased
materials variance and price and
E25-7 Compute materials and labor variances
Nona Inc. which produces a single product, has prepared the following standard cost sheet
for one unit of the product.
During the month of April, the company manufactures 235 units and incurs the following
actual costs.
Direct materials purchased and used (1,900 pounds) $5,035
Direct labor (700 hours) $8,260
Instructions
Compute the total, price, and quantity variances for labor and materials.
NOTE: Enter a number in cells requesting a value; enter either a number or a form
After you have completed the requirements of E25-7, consider this additional question.
1. Assume that the actual quantity and price paid for direct material and labor
changed to the following:
Direct materials purchased and used (2,000 pounds)
Direct labor (720 hours)
Recalculate total variance, price and quantity variances for both direct materials
and labor.
g standard cost sheet
X SP) )
X Value )
X SP )
X Value )
X SP )
X Value )
X SR )
X Value )
X SR )
X Value )
X SR )
X Value )
dditional question.
material and labor
$6,200
$8,820
Overhead is applied on the basis of standard machine hours. Three hours of machine time ar
required for each direct labor hour. The jobs were sold for $400,000. Selling and administrati
expenses were $40,000. Assume that the amount of raw materials purchased equaled the am
used.
Instructions
(a) Compute all of the variances for (1) direct materials and (2) direct labor.
(b) Compute the total overhead variance.
(c) Prepare an income statement for management. (Ignore income taxes.)
NOTE: Enter a number in cells requesting a value; enter either a number or a form
(c ) AYALA CORPORATION
Income Statement
For the Month Ended June 30, 2014
Sales revenue
Cost of goods sold (at standard)
Gross profit (at standard)
Variances
Material price Value
Materials quantity Value
Labor price Value
Labor quantity Value
Overhead Value
Total variance - favorable
Gross profit (actual)
Selling and administrative expenses
Net income
After you have completed the requirements of P25-2A, consider this additional question.
1. Assume that the actual price for raw materials changed to $2.30 and actual quantity o
Recompute total materials variance and price and quantity variances for materials.
2. Show the impact of the changes above on the income statement.
ted and finished during the month of June 2014.
Standard
$2.10
10,000
$120,000
15,000
$193,500
42,500
$55,250
$3.00
$1.30
SQ X SP) )
Value X Value )
AQ X SP )
Value X Value )
SQ X SP )
Value X Value )
SH X SR )
Value X Value )
AH X SR )
Value X Value )
SH X SR )
Value X Value )
Value
Value
Value
Value
Value
Value
Value
dditional question.
30 and actual quantity of raw materials used changed to 11,000 units.
riances for materials.
P25-6A Journalize and post standard cost entries, and prepare income statement
Jorgenson Corporation uses standard costs with its job order cost accounting system.
In january, an order (Job No. 12) for 1,900 units of Product B was received. The standard
cost of one unit of Product B is as follows.
Normal capacity for the month was 4,200 machine hours. During January, the following
transactions applicable to Job No. 12 occurred.
1. Purchased 6,200 pounds of raw materials on account at $1.05 per pound.
2. Requisitioned 6,200 pounds of raw materials for Job No. 12.
3. Incurred 2,000 hours of direct labor at a rate of $7.80 per hour.
4. Worked 2,000 hours of direct labor on Job No.12.
5. Incurred manufacturing overhead on account $25,000.
6. Applied overhead to Job No. 12 on basis of standard machine hour allowed.
7. Completed Job No. 12.
8. Billed customer for Job No. 12 at a selling price of $65,000.
Instructions
(a) Journalize the transactions.
(b) Post to the job order cost accounts.
(c ) Prepare the entry to recognize the total overhead variance.
(d) Prepare the January 2014 income statement for management. Assume selling and
administrative expenses were $2,000.
NOTE: Enter a number in cells requesting a value; enter either a number or a form
g system.
he standard
$3.00
8.00
12.50
$23.50
he following
selling and
Manufacturing overhead was applied on the basis of direct labor hours. Normal capacity for the mont
direct labor hours. At normal capacity, budgeted overhead costs were $16 per labor hour variable and
hour fixed. Total budgeted fixed overhead costs were $40,800.
Jobs finished during the month were sold for $270,000. Selling and administrative expenses were $
Instructions
(a) Compute all of the variances for (1) direct materials and (2) direct labor.
(b) Compute the total overhead variance.
(c) Prepare an income statement for management. (Ignore income taxes.)
NOTE: Enter a number in cells requesting a value; enter either a number or a form
(c ) HUANG COMPANY
Income Statement
For the Month Ended July 31, 2014
Sales revenue Value
Cost of goods sold (at standard) Value
Gross profit (at standard) Value
Variances
Material price Value
Materials quantity Value
Labor price Value
Labor quantity Value
Overhead Value
Total variance - favorable Value
Gross profit (actual) Value
Selling and administrative expenses Value
Net income Value
After you have completed the requirements of P25-2B, consider these additional questions.
1. Assume that the actual quantity and rate for labor changed to 3,600 hours and $11
Recompute total labor variance and price and quantity variances for labor.
2. Show the impact of the changes above on the income statement.
anufacture of exhaust fans.
and finished.
X SP) )
X Value )
X SP )
X Value )
X SP )
X Value )
X SR )
X Value )
X SR )
X Value )
X SR )
X Value )
dditional questions.
3,600 hours and $11.75 per hour.
ces for labor.
P25-6B Journalize and post standard cost entries, and prepare income statement
Frio Company uses standard costs with its job order cost accounting system.
In January, an order (Job No. 84) was received for 5,500 units of Product D . The standard
cost of one unit of Product D is as follows.
Overhead is applied on the basis of direct labor hours. Normal capacity for the month
of January was 6,000 direct labor hours. During January, the following transactions
applicable to Job No, 48 occurred.
1. Purchased 8,100 pounds of raw materials on account at $3.70 per pound.
2. Requisitioned 8,100 pounds of raw materials for production.
3. Incurred 5,200 hours of direct labor at a rate of $9.20 per hour.
4. Worked 5,200 hours of direct labor on Job No.84.
5. Incurred $87,500 of manufacturing overhead on account.
6. Applied overhead to Job No. 84 on basis of direct labor hours.
7. Transferred Job NO. 84 to finished goods.
8. Billed customer for Job No. 84 at a selling price of $270,000.
Instructions
(a) Journalize the transactions.
(b) Post to the job order cost accounts.
(c ) Prepare the entry to recognize the total overhead variance.
(d) Prepare the January 2014 income statement for management. Assume selling and
administrative expenses were $60,000.
NOTE: Enter a number in cells requesting a value; enter either a number or a form
(a)(1) Account
Account
Account
(a)(2) Account
Account
Account
(a)(3) Account
Account
Account
(a)(4) Account
Account
Account
(a)(5) Account
Account
(a)(6) Account
Account
(a)(7) Account
Account
(a)(8) Account
Account
Account
Account
(c ) Account
Account
After you have completed the requirements of P25-6B, consider this additional question.
1. Assume that the actual purchase priceof direct material changed to $3.90 per pound and
actual direct labor rate changed to $9.50 per hour. Revise the journal entries as approoriat
and show changes on the job cost T-accounts.
statement
t D . The standard
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
Value
014
Value
Value
Value
Value
Value
Value
Value
ditional question.
o $3.90 per pound and
nal entries as approoriate