Reference no: EM132567747

Moda Mills, Inc., is a large producer of men's and women's clothing. The company uses standard costs for all of its products. The standards costs and actual costs for a recent period are given below for one of the company's product lines (per unit of product):

Particulars                     Standard Cost                    Actual Cost

Direct materials:

Standard: 4.0 yards at             P3.60 per yard                 P14.40

Actual: 4.4 yards at                   P3.35 per yards               P14.74

Direct labor:

Standard: 1.6 hours at                P4.5 per hour                  P7.20

Actual: 1.4 hours at                     P4.85 per hour               P6.79

Variable manufacturing overhead:

Standard: 1.6 hours at                       P1.8 per hour            P2.88

Actual: 1.4 hours at                          P2.15 per hour             P3.01

Total cost per unit                                     P24.48                  P24.54

During the period, the company produced 4,800 units of product. A comparison of standard and actual costs for the period on a total cost basis is shown below:

Actual costs: 4,800 units at                     P24.54                  P117,792

Standard costs: 4,800 units at                    P24.48                     P117,504

Difference in cost (Unfavorable) P 288

There was no inventory of materials on hand to start the period. During the period, 21,120 yards of materials were purchased, all of which were used in production.

Required:

Question 1: for direct materials:

a.Compute the price and quantity variances for the period.

b. prepare journal entries to record all activity relating to direct materials for the period

Question 2: For direct labor:

a. compute rate and efficiency variances.

b. prepare the journal entry to record the incurrence of direct labor for the period.

Question 3: Compute the variable manufacturing overhead spending and efficency variances.

Question 4: On seeing the P288 total cost variance the comapny's president stated, "This variance of P288 is only 0.2% of the 117,504 standard cost for the period. It's obvious that our cost are well under control. Do you agree? explain.

Question 5: State possible causes of each variance that you have computed.