Milanese Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold. There is no variable manufacturing overhead. The company’s balance sheet at the beginning of the year was as follows:

 

Milanese Corporation
Balance Sheet
January 1
Assets
Cash	$	1,091,050
Raw materials inventory		25,100
Finished goods inventory		79,960
Property, plant, and equipment (net)		652,470
Total assets	$	1,849,290
Liabilities and Equity
Retained earnings	$	1,849,290
Total liabilities and equity	$	1,849,290

 

The standard cost card for the company’s only product is as follows:

 

Inputs	Standard Quantity or Hours		Standard Price or Rate			Standard Cost
Direct materials	1.50	gallons	$	4.00	per gallons	$	6.00
Direct labor	0.70	hours	$	24.00	per hour		16.80
Fixed manufacturing overhead	0.70	hours	$	15.90	per hour		11.13
Total standard cost per unit						$	33.93

 

The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $222,600 and budgeted activity of 14,000 hours.

 

During the year, the company completed the following transactions:

 

1. Purchased 30,400 gallons of raw material at a price of $4.90 per gallon.
2. Used 26,800 gallons of the raw material to produce 17,800 units of work in process.
3. Assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 12,860 hours at an average cost of $24.40 per hour.
4. Applied fixed overhead to the 17,800 units in work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed. Actual fixed overhead costs for the year were $233,300. Of this total, $123,520 related to items such as insurance, utilities, and indirect labor salaries that were all paid in cash and $109,780 related to depreciation of manufacturing equipment.
5. Transferred 17,800 units from work in process to finished goods.
6. Sold for cash 17,700 units to customers at a price of $49.80 per unit.
7. Completed and transferred the standard cost associated with the 17,700 units sold from finished goods to cost of goods sold.
8. Paid $53,940 of selling and administrative expenses.
9. Closed all standard cost variances to cost of goods sold.

 

Required:

1. Compute all direct materials, direct labor, and fixed overhead variances for the year.

2. Enter the beginning balances and record the above transactions in the worksheet that appears below. Because of the width of the worksheet, it is in two parts. In your text, these two parts would be joined side-by-side to make one very wide worksheet and Determine the ending balance (e.g., 12/31 balance) in each account.

Transcribed Image Text:

Materials Quantity Variance Labor Finished Goods Materials Price Variance FOH Budget Variance Labor Rate Work in Process FOH Volume Variance Retained PP&E (net) Efficiency Variance Cash Raw Materials Variance Earnings 1/1 $ 1,091,060 $ 25.800 $ 0 $ 79,960 $ 652,470 2$ 0 $ $ 0 $ 0 $ 0 $ 1,849,290 a. b. c. d. e. f. g. h. i. 12/31 Materials Quantity Variance Labor Finished Goods Materials Price Variance FOH Budget Variance Labor Rate Work in Process FOH Volume Variance Retained PP&E (net) Efficiency Variance Cash Raw Materials Variance Earnings 1/1 $ 1,091,060 $ 25.800 $ 0 $ 79,960 $ 652,470 2$ 0 $ $ 0 $ 0 $ 0 $ 1,849,290 a. b. c. d. e. f. g. h. i. 12/31

Answer rating: 100% (QA)

Part 1 Materials price variance AQ AP SP 30400 490 4 27360 U Materials quantity variance SQ Actual o... View the full answer