Quiz 4

Yarn Co.'s inventories in process were at the following stages of completion at April 30, 20X2: No. of units Percent complete 100 90 50 80 200 10 Equivalent units of production amounted to

150 100 units @ 90% 90 50 units @ 80% 40 200 units @ 10% 20 Total 150 equivalent units

For purposes of allocating joint costs to joint products, the sales price at point of sale, reduced by cost to complete after split-off, is assumed to be equal to the:

Net sales value at split-off

One hundred pounds of raw material W is processed into 60 pounds of X and 40 pounds of Y. Joint costs are $135. X is sold for $2.50 per pound and Y can be sold for $3.00 per pound or processed further into 30 pounds of Z (10 pounds are lost in the second process) at an additional cost of $60. Each pound of Z can then be sold for $6. What is the effect on profits of processing product Y further into product Z?

No change.

Relevant information for material A follows: Quantity purchased 6,500 lbs Standard quantity allowed 6,000 lbs. Actual price $3.80 Standard price $4.00 What was the direct material quantity variance for material A?

$2,000 unfavorable. (Standard quantity allowed - Actual quantity used) x Standard unit price = Material quantity variance

Relevant information for material A follows: Quantity purchased 6,500 lbs Standard quantity allowed 6,000 lbs Actual price $3.80 Standard price $4.00 What is the direct material price variance for material A?

$1,300 favorable (Standard unit price - Actual unit price) x Actual quantity purchased = Material price variance

The following information pertains to Roe Co.'s 20X1 manufacturing operations: Standard direct labor hours per unit 2 Actual direct labor hours 10,500 Number of units produced 5,000 Standard variable overhead per standard direct labor hour $3 Actual variable overhead $28,000 Roe's 20X1 unfavorable variable overhead efficiency variance was

$1,500

Dr. Oregano manufactures soft drinks. In the first department, a variety of ingredients are being mixed together while being heated at precise temperatures. The materials are added uniformly throughout the process and, when the process is complete, the output is transferred to the bottling department. Dr. Oregano uses process costing to report manufacturing costs and summarized its operations for the monthof April, 20X3, as follows: Gallons Direct Materials Beginning work in process 150,000 $108,000 Started during April 750,000 Completed during April 600,000 Ending work in process 300,000 Raw materials cost incurred in April $1,755,000 Beginning work in process inventory was 30% complete and ending work in process inventory was 40% complete. What is the cost of goods that were transferred to the bottling department using the FIFO method?

$1,551,000 Under the FIFO process costing approach, the cost per equivalent unit will be equal to the $1,755,000 incurred in April divided by equivalent production for April consisting of completing the units in beginning inventory (150,000 x 70%), 105,000 equivalent units; units started and completed during the period (750,000 started - 300,000 in ending inventory) 450,000 units; and work completed to date on ending inventory (300,000 x 40%) 120,000 for a total of 675,000 equivalent units and a cost of ($1,755,000/675,000) $2.60 per unit. Cost of units transferred to the bottling department will consist of beginning inventory of $108,000; the costs to complete those units, 150,000 x 70% x $2.60 = $273,000; and the cost of units started and completed during the period, 450,000 x $2.60 = $1,170,000 for a total of $108,000 + $273,000 + $1,170,000 = $1,551,000.

Merry Co. has two major categories of factory overhead: material handling and quality control. The costs expected for these categories for the coming year are as follows: Material handling $120,000 Quality inspection $200,000 The plant currently applies overhead based on direct labor hours. The estimated direct labor hours are 80,000 per year. The plant manager is asked to submit a bid and assembles the following date on a proposed job: Direct materials $4,000 Direct labor (2,000 hours) $6,000 What is the estimated product cost on the proposed job?

$18,000 Overhead rate = Total overhead / Total overhead cost driver $320,000 / 80,000 = $4.00 Applied overhead = Estimated overhead cost driver hours x Overhead rate 2,000 x $4.00 = $8,000 Estimated product cost Estimated product cost = Applied overhead + Prime costs $8,000 + $10,000 = $18,000

Baby Frames, Inc., evaluates manufacturing overhead in its factory by using variance analysis. The following information applies to the month of May: Actual Budgeted Number of frames manufactured 19,000 20,000 Variable overhead costs $4,100 $2 per direct labor hour Fixed overhead costs $22,000 $20,000 Direct labor hours 2,100 hours 0.1 hour per frame What is the production volume variance?

$1,000 unfavorable. Fixed overhead is budgeted at $1 per frame ($20,000/20,000 frames). As a result, with a volume of 19,000 frames, only $19,000 in fixed overhead was charged to production. Compared to the $20,000 budgeted, there is an unfavorable variance of $1,000.

The following information pertains to Lap Co's Palo Division for the month of April: Number of units Cost of materials Beginning work-in-process 15,000 $ 5,500 Started in April 40,000 18,000 Units completed 42,500 Ending work-in-process 12,500 All materials are added at the beginning of the process. Using the weighted-average method, the cost per equivalent unit for materials is

$0.43 With 15,000 units in beginning inventory and 40,000 started during the period, Lap worked on a total of 55,000 units during April. With total material costs of $5,500 + $18,000 or $23,500, the cost under the weighted average method would be $23,500/55,000 or $.43 per equivalent unit.

Baby Frames, Inc., evaluates manufacturing overhead in its factory by using variance analysis. The following information applies to the month of May: Actual Budgeted Number of frames manufactured 19,000 20,000 Variable overhead costs $4,100 $2 per direct labor hour Fixed overhead costs $22,000 $20,000 Direct labor hours 2,100 hours 0.1 hour per frame What is the fixed overhead spending variance?

$2,000 unfavorable. Budgeted fixed overhead costs: $20,000 Less actual fixed overhead costs: ($22,000) Unfavorable fixed overhead spending variance: ($2,000)

Kerner Manufacturing uses a process cost system to manufacture laptop computers. The following information summarizes operations relating to laptop computer model #KJK20 during the quarter ending March 31: Units Direct Labor Work-in-process inventory, January 1 100 $50,000 Started during the quarter 500 Completed during the quarter 400 Work-in-process inventory, March 31 200 Costs added during the quarter $720,000 Beginning work-in-process inventory was 50% complete for direct labor costs. Ending work-in-process inventory was 75% complete for direct labor costs. What is the total value of direct labor costs in ending work-in-process inventory using the weighted-average unit cost inventory valuation method?

$210,000. The equivalent units of production = units completed + completed % of WIP ending inventory = 400+ 200 X 75% = 550. Next, calculate the unit cost using the weighted-average method, which is the total cost of production (beginning WIP cost + costs added) = $50,000 + $720,000 = $770,000, divided by the equivalent units of 550, equals $1,400 per unit. Finally, we apply unit costs to ending WIP inventory equivalent units. Ending WIP inventory equivalent units = 200 X 75% = 150. The total value of direct labor costs in ending WIP inventory = 150 X $1,400 = $210,000.

Kerner Manufacturing uses a process cost system to manufacture laptop computers. The following information summarizes operations relating to laptop computer model #KJK20 during the quarter ending March 31: Units Direct Materials Work-in-process inventory, January 1 100 $50,000 Started during the quarter 500 Completed during the quarter 400 Work-in-process inventory, March 31 200 Costs added during the quarter $720,000 Beginning work-in-process inventory was 50% complete for direct materials. Ending work-in-process inventory was 75% complete for direct materials. What is the total value of material costs in ending work-in-process inventory using the FIFO unit cost inventory valuation method?

$216,000 Calculate equivalent units. FIFO method distinguishes beginning inventory units from current period units: 400 Complete units transferred out + 150 Complete units in ending WIP (200 units x 75% complete) - 50 Complete units in beginning WIP (100 units x 50% complete) 500 Equivalent units in WIP Compute unit costs. The FIFO method uses only current period costs: $720,000 / 500 equivalent units in WIP = $1,440 per equivalent unit Allocate unit costs: 150 complete units in ending WIP x $1,440 per equivalent unit = $216,000 in ending WIP

The standard direct labor cost to produce one pound of output for a company is presented below. Related data regarding the planned and actual production activities for the current month for the company are also given below. DLH = Direct Labor Hours Direct Labor Standard: 0.4 DLH @ $12.00 per DLH = $4.80 Planned production 15,000 pounds Actual production 15,500 pounds Actual direct labor costs (6,250 DLH) $75,250 The company's direct labor rate variance for the current month would be

$250 unfavorable The direct labor rate variance consists of the difference between the standard rate and the actual rate multiplied by the actual number of hours worked - remember, the foreman can control the hours worked, so the actual number is used.

Baby Frames, Inc., evaluates manufacturing overhead in its factory by using variance analysis. The following information applies to the month of May: Actual Budgeted Number of frames manufactured 19,000 20,000 Variable overhead costs $4,100 $2 per direct labor hour Fixed overhead costs $22,000 $20,000 Direct labor hours 2,100 hours 0.1 hour per frame What is the variable overhead efficiency variance?

$400 unfavorable. (Actual hours x Standard variable overhead hourly rate) - (Standard hours x Standard variable overhead hourly rate) Variable overhead efficiency variance Standard hours = actual quantity manufactured x standard direct labor rate 19,000 frames manufactured x 0.1 hour per frame = 1,900 hours (2,100 x $2) = $4,200 (1,900 x $2) = $3,800 Unfavorable VOH eff. var. = $400

A company has gathered the following information from a recent production run: Standard variable overhead rate $10 Actual variable overhead rate $8 Standard process hours 20 Actual process hours 25 What is the company's variable overhead spending variance?

$50 favorable (Standard variable overhead rate - Actual variable overhead rate) x Actual usage = Variable overhead spending variance ($10 - $8) x 25 = $50 Favorable variance

The accountant for Champion Brake, Inc. applies overhead based on machine hours. The budgeted overhead and machine hours for the year are $260,000 and 16,000, respectively. The actual overhead and machine hours incurred were $275,000 and 20,000. The cost of goods sold and inventory data compiled for the year is as follows: Direct Materials $50,000 COGS $450,000 WIP (units) $100,000 Finished Goods (units) $150,000 What is the amount of over/underapplied overhead for the year?

$50,000 Predetermined O/H rate = Estimated O/H costs / Estimated Direct Machine Hours Predetermined O/H rate = $260,000 / 16,000 = $16.25 per hour Applied O/H = Predetermined O/H rate X Actual production hours Applied O/H = $16.25 X 20,000 = $325,000 Overhead is overapplied by $50,000 ($325,000 - $275,000).

The standard direct labor cost to produce one pound of output for a company is presented below. Related data regarding the planned and actual production activities for the current month for the company are also given below. DLH = Direct Labor Hours Direct Labor Standard: 0.4 DLH @ $12.00 per DLH = $4.80 Planned production 15,000 pounds Actual production 15,500 pounds Actual direct labor costs (6,250 DLH) $75,250 The company's direct labor efficiency variance for the month would be

$600 unfavorable The direct labor efficiency variance is the difference between actual hours, 6,250, and standard hours based on actual production, 15,500 x 0.4 or 6,200 direct labor hours multiplied by the standard rate of $12.00 per DLH.