Cost and production data for Binghamton Beverages Inc. are presented as follows:

Required:
1. a. Calculate net variances for materials, labor, and factory overhead.
b. Calculate specific materials and labor variances by department, using the diagram format in Figure 8-4.
c. Comment on the possible causes for each of the variances that you computed.
2. Make all journal entries to record production costs in Work in Process and Finished Goods.
3. Determine the balance of ending Work in Process in each department.
4. Assume that 4,000 units were sold at $40 each.
a. Calculate the gross margin based on standard cost.
b. Calculate the gross margin based on actual cost.
c. Why does the gross margin at actual cost differ from the gross margin at standard cost.
5. As the plant controller, you present the variance report in Item 1 above to Paul Crooke, the plant manager. After reading it, Paul states: €œIf we present this performance report to corporate with that large unfavorable labor variance in Blending, nobody in the plant will receive a bonus. Those standard hours of 5,500 are way too tight for this production process. Fifty-eight hundred hours would be more reasonable, and that would result in a favorable labor efficiency variance that would more than offset the unfavorable labor rate variance. Please redo the variance calculations using 5,800 hours as the standard.€ You object, but Paul ends the conversation with, €œThat is an order.€
a. What standards of ethical professional practice would be violated if you adhered to Paul€™s order?
b. How would you attempt to resolve this ethical conflict?

Transcribed Image Text:

Standard Cost Summary Mixing Blending Total Materials 4 lb @ $.50 . . . Labor: 1 hr $10.00.... Factory overhead 10 18 2 $11 $13 $24 Production Report Mixing None 6,000 2,000 1/2 Blending None 5,000 1,000 1/2 Cost Data Mixing Blending Direct materials $15,600 $ 5,225 Direct labor: 54,400 57,120 Factory overhead S 500 2,000 4,500 $1,000 5,000 5,000 7,000 77,000 11,000 $73,345 Other