Reference no: EM132924737

PROBLEM 1 - Star Manufacturing has developed the following standards for one of its products.

Materials: 5 yards @ P6 per yard P30

Direct labor: 2 hours @ P8 per hour 16

The company records materials price variances at the time of purchase.

The following activity occurred during May:

Materials purchased: 5,200 yards costing P29,900

Materials used: 4,750 yards

Units produced: 1,000 units

Direct labor: 2,100 hours costing P17,850

Required -

A. Calculate the direct materials price variance.

B. Calculate the direct materials usage variance.

C. Calculate the direct labor rate variance.

D. Calculate the direct labor efficiency variance.

PROBLEM 2 - Ander Company has the following information concerning its direct labor:

Direct Labor:

Standard Hours: 6,500

Actual Hours: 6,350

Standard Rate: P15

Actual Rate: P18

Required -

A. Determine the labor rate variance and whether it is favorable or unfavorable.

B. Determine the labor efficiency variance and whether it is favorable or unfavorable.

C. Provide the journal entry for the labor variances.

PROBLEM 3 - Thorn Company has the following information available for the current year:

Standard:

Material 3.5 feet per unit @ P2.60 per foot

Labor 5 direct labor hours @ P8.50 per unit

Actual:

Material 95,625 feet used (100,000 feet purchased @ P2.50 per foot)

Labor 122,400 direct labor hours incurred per unit @ P8.35 per hour

Production 25,500 units

Required - A. Compute:

1. Material purchase price and quantity variances.

2. Labor rate and efficiency variances.

B. Based on the given information and your analyses, prepare all necessary journal entries. Assume that all those variances are considered immaterial.

PROBLEM 4 - Gapo Company produces jeans. The following standards have been established:

Direct materials (4 yards of denim @ P1.20) P4.80

Direct labor (1.5 hours @ P9) P13.50

Standard prime cost P18.30

During the year 25,000 pairs of jeans were produced. 150,000 yards of denim were purchased and used at P1.23 per yard.

Actual direct labor hours were 36,800 at P9.25 per hour.

Required -

A. Compute the materials variances and indicate if they are favorable or unfavorable.

B. Compute the labor variances and indicate if they are favorable or unfavorable.

C. Prepare the journal entries for the following:

Purchase of raw materials

Issuance of raw materials

Addition of labor to Work in Process

Closing of variances to Cost of Goods Sold

PROBLEM 5 - Mactan Company applies overhead based on direct labor hours and has the following available for the month of May:

Standard:

Direct labor hours per unit 5

Variable overhead per DLH P.75

Fixed overhead per DLH (based on 8,900 DLHs) P1.90

Actual:

Units produced 1,800

Direct labor hours 8,900

Variable overhead P6,400

Fixed overhead P17,500

Required -

A. Compute all the appropriate variances using the twovariance approach.

B. Assume that the variances are immaterial. Prepare all the necessary journal entries.

PROBLEM 6 - Wild Company applies overhead on a direct labor hour basis. Each unit of product requires 5 direct labor hours. Overhead is applied on a 40 percent variable and 60 percent fixed basis; the overhead application rate is P15 per hour. Standards are based on a normal monthly capacity of 5,000 direct labor hours. During September 2020, Wild produced 1,015 units of product and incurred 6,000 direct labor hours. Actual overhead cost for the month was P80,000.

Required -

1. What were standard hours allowed for September?

2. What is total annual budgeted fixed overhead cost?

3. What is the controllable overhead variance?

4. What is the noncontrollable (volume) variance?

PROBLEM 7 - Everjoice Company makes clocks. The fixed overhead costs for 2020 total P960,000. The company uses direct labor-hours for fixed overhead allocation and anticipates 240,000 hours during the year for 480,000 units. An equal number of units are budgeted for each month.

During June, 39,000 clocks were produced and P78,000 were spent on fixed overhead.

Required -

1. Determine the fixed overhead rate for the year based on units of input.

2. Determine the fixed overhead static-budget variance for June.

3. Determine the production-volume overhead variance for June.

PROBLEM 8 - Leary Fabrication manufactures men's clothing. The company has a single line of slacks that is produced in lots, with each lot representing an order from a customer. As a lot is completed, the customer's store label is attached to the slacks before shipment.

Leary has a standard cost system and has established the following standards for a dozen slacks:

Std Qty Std. Price Std. Cost

Direct mat. 26.4 P3.60 P93.60

Direct labor 2.4 8.50 20.40

During October, Leary worked on three orders for slacks. The company's job cost records for the month reveal the following:

Materials

Units in Lot Used Hours Lot (dozens) (yards) Worked

62 1,300 34,200 3,240

63 1,500 38,700 3,610

64 1,900 49,600 3,180

The following additional information is available:

a. Leary purchased 125,000 yards of material during October at a cost of P446,000.

b. Direct labor cost incurred during the month for production of slacks amounted to P85,600.

c. There was no work in process inventory on October 1.

During October, lots 62 and 63 were completed, and lot 64 was 100% complete with respect to materials and 70% complete with respect to labor.

Required -

1. Compute the materials price variance for the materials purchased during October.

2. Determine the materials quantity variance for October in both yards and pesos:

a. For each lot worked on during the month.

b. For the company as a whole.

3. Compute the labor rate variance for October.

4. Determine the labor efficiency variance for the month in both hours and pesos:

a. For each lot worked on during the month.

b. For the company as a whole.