Reference no: EM133058405

Application Question - Part A - Perry Products Inc. which makes school desks, uses a standard cost system and provides the following data concerning its operations during the last month (October):

Description Units or $

Units of output 750 units

Standard quantity of materials per desk 16 sq. m.

Standard price per sq. m. materials $20.00/sq. m.

Actual purchase cost of materials $259,120

Actual quantity of materials purchased 12,640 sq. m.

Actual quantity of materials used in production. 11,850 sq. m.

Std. hrs allowed per unit for labour 3 hrs. per desk

Std. wage rate $30.00

Actual wage rate $31.00

Actual direct labour hours used 2,325 hrs.

REQUIRED -

1. Prepare fully labeled variance diagrams for Direct Materials and Direct Labour including the specific dollar amounts for all variances.

2. Prepare Journal Entries relating to the variances in part 1.

Part B - The following is the standard cost card for X Company's only product

The company manufactured and sold 18,000 units of product during the year. A total of 70,200 metres of material was purchased during the year at cost of $4.20 per metre. All of this material was used to manufacture the 18,000 units. The company records showed no beginning or ending inventories for the year.

The company worked 29,250 direct labour hours during the year at a cost of $9.75 per hour. Overhead cost is applied to products on the basis of direct labour hours. The denominator activity level (direct labour hours) was 22,500 hours. Budgeted fixed overhead costs as shown on the flexible budget were $157,500, while actual fixed overhead costs were $156,000. Actual variable overhead costs were $90,000.

1. Compute the variable overhead spending and efficiency variances for the year.

2. Compute the fixed overhead budget and volume variances for the year.

3. Prepare Journal entries relating to the variances in part A & B.