Steel Dynamo Inc. produces precast metal bars for industrial use. The general manager of the plant...

  

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Steel Dynamo Inc. produces precast metal bars for industrial use. The general manager of the plant has just reviewed the contribution format income statement for September. The statement is shown below: Budgeted Sales (5,000 bars) Variable expenses: Variable cost of goods sold Variable selling expenses Total variable expenses Contribution margin Fixed expenses Manufacturing overhead Selling and administrative Total fixed expenses Net operating income (loss) Direct materials Direct labor Variable manufacturing overhead Total standard variable cost 250,000 "Based on machine-hours 80,000 20,000 100,000 150,000 60,000 75,000 135,000 15,000 Standard Quantity or Hours Actual *Contains direct materials, direct labor, and variable manufacturing overhead The general manager was shocked to see the loss for the month, especially since sales were exactly as budgeted. He met with the accounting manager to obtain information from the standard cost system. He reviewed the following standard variable cost per metal bar. 4.0 pounds 0.6 hours 0.3 hours 250,000 96,660 20,000 116,660 133,340 60,000 75,000 135.000 -1,660 Standard Price or Rate $2.50 pound $9.00 hr $2.00 Ar Standard Cost $10.00 $5.40 $0.60 $16.00 During September, the plant produced 5.000 bars and incurred the following costs: a. Purchased 24,000 pounds of materials at a cost of $2.95 per pound. There were no raw materials in inventory at the beginning of the month b. Used 20,800 pounds of materials in production (Finished goods and work-in-process inventories are insignificant and can be ignored.) c. Worked 3,500 direct labor-hours at a cost of $8.80 per hour. d. Incurred a total variable manufacturing overhead cost of 54.500 for the month. A total of 1,900 machine-hours was recorded. It is the company's policy to close all variances to cost of goods sold on a monthly basis. 1. Compute the following variances for September. a. Direct materials price and quantity variances b. Direct labor rate and efficiency variance, c. Variable overhead rate and efficiency variances 2. Summarize the variances computed in question 1 by showing the net overall favorable or unfavorable variance for September 3. Pick out the two most significant variances that you computed in question 1. Explain possible causes of these variances. Steel Dynamo Inc. produces precast metal bars for industrial use. The general manager of the plant has just reviewed the contribution format income statement for September. The statement is shown below: Budgeted Sales (5,000 bars) Variable expenses: Variable cost of goods sold Variable selling expenses Total variable expenses Contribution margin Fixed expenses Manufacturing overhead Selling and administrative Total fixed expenses Net operating income (loss) Direct materials Direct labor Variable manufacturing overhead Total standard variable cost 250,000 "Based on machine-hours 80,000 20,000 100,000 150,000 60,000 75,000 135,000 15,000 Standard Quantity or Hours Actual *Contains direct materials, direct labor, and variable manufacturing overhead The general manager was shocked to see the loss for the month, especially since sales were exactly as budgeted. He met with the accounting manager to obtain information from the standard cost system. He reviewed the following standard variable cost per metal bar. 4.0 pounds 0.6 hours 0.3 hours 250,000 96,660 20,000 116,660 133,340 60,000 75,000 135.000 -1,660 Standard Price or Rate $2.50 pound $9.00 hr $2.00 Ar Standard Cost $10.00 $5.40 $0.60 $16.00 During September, the plant produced 5.000 bars and incurred the following costs: a. Purchased 24,000 pounds of materials at a cost of $2.95 per pound. There were no raw materials in inventory at the beginning of the month b. Used 20,800 pounds of materials in production (Finished goods and work-in-process inventories are insignificant and can be ignored.) c. Worked 3,500 direct labor-hours at a cost of $8.80 per hour. d. Incurred a total variable manufacturing overhead cost of 54.500 for the month. A total of 1,900 machine-hours was recorded. It is the company's policy to close all variances to cost of goods sold on a monthly basis. 1. Compute the following variances for September. a. Direct materials price and quantity variances b. Direct labor rate and efficiency variance, c. Variable overhead rate and efficiency variances 2. Summarize the variances computed in question 1 by showing the net overall favorable or unfavorable variance for September 3. Pick out the two most significant variances that you computed in question 1. Explain possible causes of these variances.

Answer rating: 100% (QA)

Lets calculate the variances for September based on the information provided a Direct Materials Variances Direct Materials Price Variance Actual Quantity Purchased 24000 pounds Actual Price 295 per po... View the full answer