Standard Costs: Standard TotalInformation for March: tMaterial t Labor budget fo

Question

Standard Costs: Standard TotalInformation for March: tMaterial t Labor budget for March: l March 25,000 units produced & sold 30,000 units produced & sold $40.0 $14 per hour$28.0 5 per hour Overhead hours Total standard variable costuni $78 Purchased 160,000 pounds of material-all used in production $7.50 per pound b) Direct-labor hours 55,000 $15.00 per hour Cost Formulas: Fixed Cost Variabl Cost Total VOH was $280,500 $200,000 $100,000 $12 $3 Advertising Sales Salaries &Commissions; Shi $210,000 $455,000 $115,000 Shi USE THE ATTACHED VARIANCE GRIDS THE ANSWER THE FOLLOWING QUESTIONS… How much raw materials costs would be indluded in the flexible budget for March? What are the raw materials price & quantity variances for March? What are the journal entries associated with these variances? What would be the raw materials price & quantity variances in March with the following changed: Raw materials purchased Purchase price Raw materials used 170,000 pounds S7.50 per pound 160,000 pounds What direct labor cost would be included in the flexible budget for March: What is he direct labor rate & efficiency variances in March? What are the journal entries associated with these variances? What variable manufacturing overhead cost would be included in he flexible budget for March? What are the variable overhead rate & efficency variances for March? What amounts of advertising, sales salaries & commissions, and shipping would be included in the flexible budget for March? What are the spending variances related to advertising. sales salaries & commissions, and shipping for March?

Explanation / Answer

1). Raw material cost to be included in flexible budget for march : Actual units * Std price
30000 units * $40 per unit = $1,200,000
Flexible budget is based on actual production and costs are calculated on the basis of std rates.

2).Material price variance = (Std price - Actual price) * Actual qty
=(8 - 7.5)* 160000 pounds = 80000 F

Material Qty variance = (Std qty for actual production - Actual qty)* Std rate
= (30000 units* 5pounds - 160000 pounds) * 8
= (150000 - 160000) * 8 = 80000 U

3). Material price variance as the time of purchase = (8-7.5) * 170000 pounds = 85000 F
Material qty variance = (150000 - 160000) * 8 =80000 U
Here material qty variance will remain same because it is based on qty used and not qty purchased.

4). Direct labour cost to be included in flexible budget for march:
30000 units * 28 per unit = $840,000

5). Direct labour rate variance = (Std rate - Actual rate)* Actual hrs
=(14 - 15) * 55000 hrs = 55000 U

Direct labour efficiency variance = (Std hrs for actual production - Actual hrs) * Std rate
= (30000 units * 2 hrs - 55000 hrs) * 14 per hr
= (60000 - 55000) *14 = 70000 F

6). Variable overhead cost to be included in flexible budget for march.
30000 units * 10 per unit = $300,000

7). Variable overhead spending variance = Budgeted var. overhead for actual hrs - Actual overhead
=(55000 hrs * $5 per hr) - 280500 = 5500 U

Variable overhead efficiency variance = Std var. overhead for production - Budgeted var. overhead for actual hrs
= (30000 units * 10 per unit) - (55000 hrs * 5 per hr)
= 300000 - 275000 = 25000 F

8). Amounts to be included in flexible budget are:
Advertising                         $200000
Sales salaries                    $460000   ($10000 + (30000 * 12))
Shipping                            $90000    (30000*3)
Total                                $750,000

9). Spending variances:
Advertising = 200000 - 210000 = 10000 U
Sales salaries = 460000 - 455000 = 5000 F
Shipping = 90000 - 115000 = 25000 U

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