| There is only one problem this week on manufacturing variance. |
| Apollo Sports manufacturers fabric tents. The poles are purchased from a vendor, so the only part manufactured is the actual fabric tent. |
| The company uses a standard cost system based on manufacturing 5,000 tents per month. Overhead is applied on a per-unit basis. In May, |
| 4,840 tents were produced. Management has a policy that all variances greater than 3% from standard should be investigated. Standard and |
| actual costs are listed below: |
| | Standard |
| Direct material | 18 yards at $3.20 per yard |
| Direct labor | 6.5 hours at $16.00 per hour |
| Overhead applied | $12.00 per tent |
| | Actual |
| Direct material | 86,550 yards at $3.25 per yard |
| Direct labor | 32,100 hours at $15.80 per hour |
| Actual overhead | $56,750 |
| INSTRUCTIONS: |
| 1. Compute the total, price, and quantity variances for both materials and labor. |
| State if each variance is favorable or unfavorable. |
| 2. Compute the total, volume, and budget overhead variances. State if favorable |
| or unfavorable. |
| 3. Prepare journal entries for the application of overhead, the actual overhead, |
| and to record variances and close the overhead account. Note that on the actual |
| overhead you will not have individual expense account amount, so just list |
| "various" for the expense accounts. |
| 4. Always label all of your work. |
| SOLUTION: |
| First, compute total standard quantity at actual production of 4,840 tents. |
| Direct material | 87,120 |
| Direct labor | 31,460 |
| Overhead applied | 58,080 |
| Total materials variance: (actual qty × actual price) − (standard qty × standard price) |
| 281,288 | 278,784 |
| Materials price variance: (actual qty × actual price) − (actual qty × std price) |
| 281,288 | 276,960 |
| Materials quantity variance: (actual quantity × std price) − (standard qty × std price) |
| 276,960 | 278,784 |
| Total labor variance: (actual hours × actual rate) − (standard hours × standard rate) |
| 507,180 | 503,360 |
| Labor rate variance: (actual hours × actual rate) − (actual hours × std rate) |
| 507,180 | 513,600 |
| Labor quantity variance: (actual hours × std rate) − (standard hours × std rate) |
| 513,600 | 503,360 |
| Total overhead variance: (actual overhead) − (actual quantity × standard rate) |
| 56,750 | 58,080 |
| Overhead volume variance: (actual production qty × std rate) − (standard production qty × std rate) |
| 58,080 | 60,000 |
| Overhead budget variance (total variance − quantity variance) |
| - 0 | - 0 |
| Journal entries: |
| Application of overhead | | Debit | Credit |
| | Work in process |
| | Manufacturing overhead |
| Recording actual overhead |
| | Manufacturing overhead |
| | Various expense accounts |
| Recording variance and closing overhead account |
| | Manufacturing overhead |
| | Overhead budget variance |
| | Overhead |
expertprof_4u
week7homework.xlsx
