Quiz #4 Spring 2018 Emerson Company produces ceramic tea pots. Emerson allocates

Question

Quiz #4

Spring 2018

Emerson Company produces ceramic tea pots. Emerson allocates overhead based on the number of direct labor hours. The company is considering using a standard cost system and has developed the following standards (a batch is 100 teapots).

Standard Costs:                    

Direct Material                                    60 lbs. per batch          $ 5.00 per lb. .          

Direct Labor                                        3.0 hr. per batch         $17.00 per hr.

Variable Manufacturing Overhead     3.0 hr.                          $7.00 per hr.

Fixed Manufacturing Overhead         3.0 hr.                          $3.00 per hr.   

2018 Budgeted Data for February:

Budgeted production, 121 batches (100 tea pots each batch)

Denominator Hours, 363 DLH. (Emerson applies overhead on the basis of direct labor hours.)

Budgeted variable overhead, $2,541

Budgeted fixed overhead, $1,089.

2018 Actual Results for February:               

Direct material purchases were 4,500 lbs. at a cost of $4.70 per lb.

Direct material used was 4,100 lbs.

Direct labor costs was $3,344 at an average direct labor cost per hour of $17.60.

Total variable manufacturing overhead was $1,406.

Total fixed manufacturing overhead was $1,490.

Actual production was 60 batches.

    EXTRA CREDIT: (Worth 5 pts) Prepare journal entries for:

a.         material price and quantity variances.

b.         labor rate and efficiency variances.

Explanation / Answer

Computation of Direct Material Price & Quantity Variance Journal Entry Direct Material Price Price variance (SP-AP)AQ ($5-$4.70)*4500 $1,350 favourable Particular Debit Credit Direc Material Quantity Variance (SQ-AQ)SP (3600-4100)*5 ($2,500) Unfavourable Material Price Variance Material Control A/c ($5*4500) $22,500 Computation of Direct Labour Rate & Efficiency Variance To Material Price Variance $1,350 Direct Labour Rate variance (SR-AR)*AH ($17-$17.60)*($3344/$17.60) ($114) Un Favourable To Creditor ($4.70*4500) $21,150 Direct Labour Efficiency Variance (SH-AH)SR (180-190)*$17 ($170) Un Favourable Material Quantity Variance WIP (3600*$5) $18,000 Material Usage Variance $2,500 To Material Control A/c (4100*$5) $20,500 Labour Rate Variance Labour Control A/c ($17*190) $3,230 Labour Rate Variance $114 To Labour Payable A/c ($17.60*190) $3,344 Labour Efficiency Variance WIP (180*$17) $3,060 Labour Efficiency Variance $170 To Labour Control A/c (190*$17) $3,230

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.