Question

Walter Manufacturing Company produces a component part of a top secret military communication device. Standard production and cost data for the part, Product X, follow.
Planned production .......... 30,000 units
Per unit direct materials ....... 2 lbs. @ $3.60 per lb.
Per unit direct labor .......... 3 hrs. @ $16.00 per hr.
Total estimated fixed overhead costs ... $1,404,000
Walter purchased and used 63,345 pounds of material at an average cost of $3.70 per pound. Labor usage amounted to 89,160 hours at an average of $16.20 per hour. Actual production amounted to 30,900 units. Actual fixed overhead costs amounted to $1,476,000. The company completed and sold all inventory for $3,600,000.

Required
a. Prepare a materials variance information table showing the standard price, the actual price, the standard quantity, and the actual quantity.
b. Calculate the materials price and usage variances. Indicate whether the variances are favorable (F) or unfavorable (U).
c. Prepare a labor variance information table showing the standard price, the actual price, the standard hours, and the actual hours.
d. Calculate the labor price and usage variances. Indicate whether the variances are favorable (F) or unfavorable (U).
e. Calculate the predetermined overhead rate, assuming that Walter uses the number of units as the allocation base.
f. Calculate the fixed cost spending and volume variances and indicate whether they are favorable (F) or unfavorable (U).
g. Determine the amount of gross margin Walter would report on the year-end income statement.



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  • CreatedFebruary 07, 2014
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