Butrico Manufacturing Corporation uses a standard cost system, records materials
ID: 2341523 • Letter: B
Question
Butrico Manufacturing Corporation uses a standard cost system, records materials price variances when direct materials are purchased, and prorates all variances at year-end. Variances associated with direct materials are prorated based on the balances of direct materials in the appropriate accounts, and variances associated with direct labor and manufacturing overhead are prorated to Finished Goods Inventory and to Cost of Goods Sold (CGS) on the basis of the relative direct labor cost in these accounts at year-end.
The following information is for the year ended December 31:
The company had no beginning inventories and no ending Work-in-Process (WIP) Inventory. It applies manufacturing overhead at 80% of standard direct labor cost.
Required:
1. Compute the amount of Direct Materials Price Variance to be prorated to Finished Goods Inventory at December 31.
2. Compute the total amount of direct materials cost in the Finished Goods Inventory at December 31, after all materials variances have been prorated.
3. Compute the total amount of direct labor cost in the Finished Goods Inventory at December 31, after all variances have been prorated.
4. Compute the total Cost of Goods Sold (CGS) for the year ended December 31, after all variances have been prorated.
Finished goods inventory at 12/31: Direct materials $ 85,500 Direct labor 130,400 Applied manufacturing overhead 104,700 Direct materials inventory at 12/31 65,300 Cost of goods sold for the year ended 12/31: Direct materials $ 352,100 Direct labor 740,600 Applied manufacturing overhead 592,500 Direct materials price variance (unfavorable) 11,100 Direct materials usage variance (favorable) 15,300 Direct labor rate variance (unfavorable) 19,900 Direct labor efficiency variance (favorable) 5,500 Actual manufacturing overhead incurred 691,300Explanation / Answer
Finished goods COGS Total Total for pro-ration Direct materials 85,500 352,100 437,600 Direct labor 130,400 740,600 871,000 Applied manufacturing overhead 104,700 592,500 Cost before proration of all variances-----1 320,600 1,685,200 2,005,800 Material variances Add:Direct materials price variance(UF) 2169 8931 11,100 Less:Direct materials usage variance(F) -2989 -12311 -15300 Net Direct material variances------2 -821 -3379 -4200 Direct Labor Add:Direct labor rate variance (UF) 2979 16921 19900 Less:Direct labor efficiency variance(F) -823 -4677 -5500 Net Direct Labor cost variances------3 2156 12244 14400 Less:MOH Over applied--------------4 -883 -5017 -5,900 Total cost after proration of all variances -------------1+2+3+4 321,052 1,689,048 2,010,100 ANSWERS:(From the above Table) 1.Amount of Direct Materials Price Variance to be prorated to Finished Goods Inventory at December 31 (F) -821 2. Total amount of direct materials cost in the Finished Goods Inventory at December 31, after all materials variances have been prorated. 85500-821= 84679 3. Total amount of direct labor cost in the Finished Goods Inventory at December 31, after all variances have been prorated. 130400+2156= 132556 4.Total Cost of Goods Sold (CGS) for the year ended December 31, after all variances have been prorated. 1,689,048 Alternate Table Finished goods COGS Total Total for pro-ration Direct materials 85,500 352,100 437,600 Direct labor 130,400 740,600 871,000 Applied manufacturing overhead 104,700 592,500 Cost before proration of all variances 320,600 1,685,200 2,005,800 Add: Unfavourable variances: Direct materials price variance 2169 8931 11,100 Direct labor rate variance 2979 16921 19,900 Less: favourable variances: Direct materials usage variance -2989 -12311 -15,300 Direct labor efficiency variance -823 -4677 -5,500 Less:MOH Over applied -883 -5017 -5,900 Total cost after proration of all variances 321052 1689048 2010100
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