Problem #1: Standard Costing Ultra, Inc. manufactures and sells a full line of s

Question

Problem #1: Standard Costing Ultra, Inc. manufactures and sells a full line of sunglasses. The company uses a standard cost system. Department managers' are held responsible for the explanation of the variances in their department performance reports. Recently, the variances in the Prestige line of sunglasses have been of concern. Data for the month of August is presented below. Assume beginning and ending inventory levels for WiP and FG are zero. Static Bud $600,000 $150,000 $135,000 $114,000 $201,000 tual $575,000 $145,000 $142,000 $111,000 $177,000 revenues DM DL FOH (cost driver gross profit DL hours) selling price per Prestige sunglass DM (total # ounces) DL rate (S per DL hour) $76.923 15,600 $18.00 $78.767 16,000 $14.20

Explanation / Answer

2) Account titles Debit Credit WiP inventory (SQ*SP) (14600*9.62) 140452 DM efficiency variance 13468 DM inventory (AQ*SP) (16000*9.62) 153920 (release of DM into production) Notes: Static budget is based on 7800 sunglasses (600000/76.923) Standard cost data: Direct materal price per ounce=150000/15600=$9.62 per ounce Ounce required per sunglasses=15600/7800=2 ounce Actual units of sunglasses=575000/78.767=7300 sunglasses Direct materal price per ounce=145000/16000=$9.06 per ounce Standard quantity required=Actual production*ounce required per sunglasses=7300*2=14600

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