Standard Costing Casses [PDF]

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Case 1 Chef's Best company is planning to produce 800,000 electric mixer for next year. each mixer takes half an hour of labor standards for its completion. the company uses direct labor hours to charge overhead on the product. total overhead budgeted for the following year was 1120000 and the standard fixed overhead rate is $0.55 per unit produced. actual results for the current year are as follows Actual production (units)



786.000



Actual direct labor hours



390.000



Actual variable overhead



$695.000



Actual fixed overhead



$430.000



Asked: 1. Calculate the fixed overhead applied 2. Calculate the volume variance and fixed overhead spending 3. Calculate the variable overhead applied 4. Calculate the variance of the variable overhead spending and efficiency Answer 1. Fixed overhead rate = $0.55/(1/2 hr. per unit) = $1.10 per DLH SH = 786,000 × 0.5 = 393,000 Applied FOH = $1.10 × 393,000 = $432,300 2. Fixed overhead analysis: Actual FOH



Budgeted FOH



Applied FOH



$430,300



$1.10 × 400,000*



$1.10 × 393,000



$9,700 F



$7,700 U



Spending



Volume



*400,000 expected hours = 0.5 hour × 800,000 units) 3. Variable OH rate = ($1,120,000 – $440,000)/400,000= $1.70 per DLH 4. Variable overhead analysis: Actual VOH



Budgeted VOH



Applied VOH



$695,000



$1.70 × 390,000



$1.70 × 393,000



$32,000 U



$5,100 F



Spending



Efficiency



Case 2 In early 2008, Krayler Company has the following standard cost sheet to produce one of the chemical products Direct materials (6 pounds @ $ 6.40)



$ 38.40



Direct labor (1.8 hours @ $ 18.00)



32.40



Fixed overhead (1.8 hours @ $ 8.00)



14.40



Variable overhead (1.8 hours @ $ 1.50) Standard cost per unit



2.70 $ 87.90



Krayler calculate overhead rate by using practical volume, which is 288,000 units. Actual results for 2008 are as follows: a. Units produced: 280,000 b. Materials purchased: 1.6847 million pounds worth of @ 6.60 c. Raw materials used: 1.684 million pounds d. Direct labor: 515,000 hours at a cost of $ 18.10 e. Fixed overhead: $ 4,140,200 f. Variable overhead: @ 872 000 Requested: 1. Calculate the price and usage variances for raw materials! 2. Calculate the labor rate variance and a labor efficiency! 3. Calculate the spending variance and fixed overhead volume! 4. Calculate the variance of the variable overhead spending and efficiency! 5. Relates to the data in the 9-14 workout, prepare journal entries for the following! a. Purchase of raw materials b. Expenditure of raw materials for production (work in process) c. Additional labor for work in progress d. Additional overhead to work in process e. Closing variance of raw materials, labor, and overhead to cost of goods sold Answer: 1. MPV = (AP – SP)AQ = ($6.60 – $6.40)1,684,700 = $336,940 U MUV = (AQ – SQ)SP = (1,684,000 – 1,680,000)$6.40 = $25,600 U



Note: There is no three-pronged analysis for materials because materials purchased is different from the materials used. (MPV uses materials purchased and MUV uses materials used.) 2. LRV



= (AR – SR)AH = ($18.10 – $18.00)515,000 = $51,500 U



LEV



= (AH – SH)SR = [515,000 – (1.8 × 280,000 units)]$18.00 = $198,000 U AR × AH



$18.10 × 515,000



SR × AH



SR × SH



$18 × 515,000



$18 × 504,000



$51,500 U



$198,000 U



Rate



Efficiency



3. Fixed overhead analysis: Actual FOH



Budgeted FOH



Applied FOH



$4,140,200



$8 × 518,400



$8 × 504,000



$7,000 F



$115,200 U



Spending



Volume



Note: Practical volume in hours = 1.8 × 288,000 = 518,400 hours 4. Variable overhead analysis: Actual VOH



Budgeted VOH



Applied VOH



$872,000



$1.50 × 515,000



$1.50 × 504,000



$99,500 U



$16,500 U



Spending



Efficiency



5. Journal Entries a. Materials Inventory MPV



10,782,080 336,940



Accounts Payable b. Work in Process MUV



11,119,020 10,752,000 25,600



Materials Inventory



10,777,600



c. Work in Process



9,072,000



LRV



51,500



LEV



198,000 Accrued Payrol



d. Work in Process



l9,321,500 4,788,000



Fixed Overhead Control



4,032,000



Variable Overhead Control



756,000



e. Materials and labor: Cost of Goods Sold



612,040



MPV



336,940



MUV



25,600



LRV



51,500



LEV



198,000



Overhead disposition: Cost of Goods Sold



108,200



Fixed Overhead Control Cost of Goods Sold Variable Overhead Control



108,200 116,000 116,000