Question

Colonial Furniture Co. uses a standard cost system. One of the company’s most popular products is a cherrywood desk. The per-unit standard costs of the desk, assuming a “normal” volume of 2,000 units per month, are as follows:


During May, 1,800 desks were scheduled and produced at the following actual unit costs:
Direct materials, 105 feet at $1.40 per foot . . . . . . . . . . . . . . . . . . . . . $147.00
Direct labor, 4 1⁄ 2 hours at $9.00 per hour . . . . . . . . . . . . . . . . . . . 40.50
Manufacturing overhead, $34,200 ÷ 1,800 units . . . . . . . . . . . . . . . . 19.00
Total actual unit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $206.50

Instructions
a. Compute the following cost variances for the month of May:
1. Materials price variance
2. Materials quantity variance
3. Labor rate variance
4. Labor efficiency variance
5. Overhead spending variance
6. Volume variance
b. Prepare journal entries to assign manufacturing costs to the Work in Process Inventory account and to record cost variances for May. Use separate entries for
(1) Direct materials,
(2) Direct labor, and
(3) Overhead costs.
c. Comment on any significant problems or areas of cost savings revealed by your computation of cost variances. Also comment on any possible causal relationships between significant favorable and unfavorable costvariances.


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  • CreatedApril 17, 2014
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