Material price variance and the material usage

Assignment Help Financial Accounting

Reference no: EM13169554

Lang products had the following beginning and ending inventory balances for April 2009.

Raw Material Inventory $18,000 $20,800

Work in Process Inventory 85,200 50,800

Finished Goods Inventory 43,200 14,700

All raw materials are considered direct to the manufacturing process. During April, the company purchased $260,000 of raw materials. Direct labor cost for the month was $342,000; workers are paid $9.50 per hour. Overhead is applied at the rate of $12.50 for each direct labor hour.

a. Prepare the Schedule of Cost of Goods Manufactured.

b. Calculate Cost of Goods Sold for April 2009.

CVP Analysis

S'No'Kones has the following cost structure.

Selling price per unit $1.50

Variable cost per unit $0.45

Fixed costs per month $1,260

a. What is the break-even point for S'No'Kones?

b. If the owner wamts to earn a monthly pretax profit of $1,200, how many units would neeed to be sold each month?

c. The owner wants to earn a pretax profit of $24,360 annually. the snow cone stand is only open five months of the year (May through September) and no fixed costs are incurred when the stand is not open. How many snow cones would need to be sold in total during those five months? If three months of the five generate 75 percent of the company sales, how many snow cones would need to be sold during those three months?

d. Recalculate your answer to part (c) assuming a tax rate of 20 percent and a desired after-tax profit of $24,360.

e. S'No'Kones is located in the panhandle of Florida. Discuss circumstances that might cause the BEP and CVP assumptions to be inaccurate.

Direct Material and Direct Labor Variances

Dauterive Co. manufacturers wooden pen and pencil holders. The following material and labor standards have been set for one holder.

5 ounces of wood at $0.50 per ounce $2.50

4 minutes of labor time at $9.00 per hour 0.60

During July, the company incurred the following costs to manufacture 46,800 holders.

14,250 pounds of wood at $8.30 per pound $118,275

3,840 hours of labor time at $9.25 per hour 35,520

a. What is the standard quantity of material allowed for the actual production?

b. Compute the material price and quantity variances.

c. What are the standard hours of labor time allowed for the actual production?

d. Compute the labor rate and efficiency variances.

e. What relationship might exist between the material price variance and the material usage and labor efficiency variances?

f. What relationship might exist between the labor rate variance and the labor efficiency variance?

Reference no: EM13169554

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