The Master Road Co. manufactures a type of child\'s bicycle and uses a standard

Question

The Master Road Co. manufactures a type of child's bicycle and uses a standard cost system. The following data arc shown on the standard cost card for the bicycle: The fixed overhead rate of $3.10 per machine hour was based on a budgeted level of activity for calendar year 2015 of 18.480 machine hours. Below are additional data regarding operations for 2015: Actual direct material purchased: 82,000 lbs. at a total cost of $323,900 Actual average direct labor rate: $6.40 per hour Actual total variable overhead: $49,000 Direct material quantity variance: $16,080 U Fixed overhead spending variance: S5.000 F Actual total direct labor hours: 5,650 Actual total direct materials used: 78,000 lbs. Actual total machine hours: 17.500 Required: Determine the actual number of bicycles produced during 2015. Compute the following variances for 2015 (indicate whether each variance is favorable or unfavorable): direct material price variance (based on purchases) direct labor rate variance direct labor efficiency variance variable overhead spending variance c. fixed overhead volume variance Make all appropriate summary general journal entries to account for (a) the purchase of direct materials during 2015. and (b) direct labor costs incurred during 2015. The company uses a perpetual inventory system.

Explanation / Answer

Material Quantity Variance = (Actual Quantity - Standard Quantity) x Standard Cost per Unit

Standard Cost = $4.02 Per lb., Actual Quantity = 78,000 lb.

16,080 = (78,000 - X) x 4.02

16,080 = 313,560 - 4.02X

X = 329,640

Standard Material used = 329,640 / 4.02 = 82,000 lb.

Actual Bicycles Produced = 82,000/ 20 = 4,100

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