EZ Tees Corporation produces T-shirts. The company uses a standard costing system and has set the following
Question:
EZ Tees Corporation produces T-shirts. The company uses a standard costing system and has set the following standards for direct materials and direct labor (for one shirt):
Fabric (1.5 yds. @ $2.80) | $4.20 |
Direct labor (1.1 hr. @ $20) | 22.00 |
Total prime cost | $26.20 |
During the year, EZ Tees produced 9,600 T-shirts. The actual fabric purchased was 14,300 yards at $2.76 per yard. There were no beginning or ending inventories of fabric. Actual direct labor was 10,680 hours at $19.60 per hour.
Required:
Question Content Area
1. Compute the costs of fabric and direct labor that should have been incurred for the production of 9,600 T-shirts.
Direct materials | $ |
Direct labor | $ |
2. Compute the total budget variances for direct materials and direct labor.
Direct materials | $ | Favorable or Unfavorable |
Direct labor | $ | Favorable or Unfavorable |
3. Break down the total budget variance for direct materials into a price variance and a usage variance.
Materials Price Variance | $ | Favorable or Unfavorable |
Materials Usage Variance | $ | Favorable or Unfavorable |
Question Content Area
Prepare the journal entries associated with these variances. If an amount box does not require an entry, leave it blank.
Price Variance | |||
Usage Variance | |||
Question Content Area
4. Break down the total budget variance for direct labor into a rate variance and an efficiency variance.
Labor Rate Variance | $ | Favorable or Unfavorable |
Labor Efficiency Variance | $ | Favorable or Unfavorable |
Question Content Area
Prepare the journal entries associated with these variances. If an amount box does not require an entry, leave it blank.
Cornerstones of Cost Management
ISBN: 978-1285751788
3rd edition
Authors: Don R. Hansen, Maryanne M. Mowen