CHAP 25 **IF YOU'RE NOT ABLE TO ANSWER ALL, PLEASE SKIP. THANK YOU**

1) Buil Corporation manufactures a single product. The standard cost per unit of product is as follows.

Direct materials2 pounds of plastic at $6 per pound $12

Direct labor2 hours at $13 per hour 26

Variable manufacturing overhead 7

Fixed manufacturing overhead 5

Total standard cost per unit $50

The master manufacturing overhead budget for the month based on normal productive capacity of 20,000 direct labor hours (10,000 units) shows total variable costs of $70,000 ($3.50 per labor hour) and total fixed costs of $50,000 ($2.50 per labor hour). Normal productive capacity is 20,000 direct labor hours. Overhead is applied on the basis of direct labor hours. Actual costs for November in producing 9,700 units were as follows.

Direct materials (20,000 pounds) $119,000

Direct labor (19,600 hours) 256,760

Variable overhead 68,800

Fixed overhead 50,000

Total manufacturing costs $494,560

The purchasing department normally buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.

Instructions

(a) Compute all of the materials and labor variances.

(b) Compute the total overhead variance.

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2) Bonita Labs performs steroid testing services to high schools, colleges, and universities. Because the company deals solely with educational institutions, the price of each test is strictly regulated. Therefore, the costs incurred must be carefully monitored and controlled. Shown below are the standard costs for a typical test.

Direct materials (1 petri dish @ $1.80 per dish) $ 1.80

Direct labor (0.5 hours @ $20.50 per hour) 10.25

Variable overhead (0.5 hours @ $8 per hour) 4.00

Fixed overhead (0.5 hours @ $5 per hour) 2.50

Total standard cost per test $18.55

The lab does not maintain an inventory of petri dishes. Therefore, the dishes purchased each month are used that month. Actual activity for the month of May 2016, when 2,500 tests were conducted, resulted in the following.

Direct materials (2,530 dishes) $ 5,060

Direct labor (1,240 hours) 26,040

Variable overhead 10,100

Fixed overhead 5,700

Monthly budgeted fixed overhead is $6,000. Revenues for the month were $55,000, and selling and administrative expenses were $2,000.

Instructions (A, B, C ARE ALREADY DONE. JUST NEED HELP WITH QUESTION D)

(a) Compute the price and quantity variances for direct materials and direct labor.

(b) Compute the total overhead variance.

(c) Prepare an income statement for management.

(d) Provide possible explanations for each unfavorable variance.

(a) Total Materials Variance: FAQ x AP) - SOX SP) O Materials Price Variance: TAQ X AP) (A x SP Materials Quantity Variance: ARX AP) - SOX SP) 0 Total Labor Variance: AL X AR) 1. SH X SRE *9.200 Labor Price Variance: CALX AR U SH X SR) Labor Quantity Variance: CAH X SR SHY SRT (b) Total Overhead Variance: Actual Overhead - Overhead Applied #(a) Materials price variance: (AQ X AP) - (AQ X SP) (2,530 X $2.00) (2,530 X $1.80) $5,060 - $4,554 *$5,060 - 2,530 = $506 U Materials quantity variance: (AQ X SP) - SQ X SP) (2,530 X $1.80) (2,500 X $1.80) $4,554 - $4,500 = $54 U Labor price variance: (AH X AR) (1,240 X $21") $26,040 $26,040 +1,240 - (AH X SR) (1,240 X $20.50) - $25,420 = $620 U Labor quantity variance: (AH X SR) (1,240 X $20.50) $25,420 *2,500 X.5 - (SH X SR) (1,250" X $20.50) -$25,625 = $205 F (b) Total overhead variance: Actual Overhead - Overhead Applied $15,800 - $16,250 [($10,100 + $5,700) - (1,250 X $13") "($8 + $5) = $450 F BONITA LABS Income Statement For the Month Ended May 31, 2017 $55,000 46.375 8,625 $ Service revenue ....... Cost of service provided (at standard) ($18.55 X 2,500)... ... Gross profit (at standard)............... Variances Materials price.... .... Materials quantity. ........ Labor price................. Labor quantity ..... ...... Overhead.................. Total variance-unfavorable.... Gross profit (at actual) Selling and administrative expenses .... ......... Net income.... 506 U 54 U 620 U 205 F 450 F 525 8,100 2.000 $6.100