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Category > Accounting Posted 23 Dec 2017 My Price 10.00

company uses a standard cost system

Barberry, Inc., manufactures a product called Fruta. The company uses a standard cost system and has established the following standards for one unit of Fruta:


 

  Standard Quantity Standard Price
or Rate		 Standard Cost
  Direct materials    1.60 pounds $ 6.00  per pound $ 9.60   
  Direct labor    0.90 hours $ 13.00  per hour    11.70  
  Variable manufacturing overhead    0.90 hours $ 2.00  per hour    1.80  
                
          $ 23.10   
                
 


 

During June, the company recorded this activity related to production of Fruta:
a.

The company produced 3,100 units during June.
b. A total of 8,100 pounds of material were purchased at a cost of $46,980.
c.

There was no beginning inventory of materials; however, at the end of the month, 2,050 pounds of material remained in ending inventory.
d.

The company employs 15 persons to work on the production of Fruta. During June, they worked an average of 170 hours at an average rate of $13.50 per hour.
e.

Variable manufacturing overhead is assigned to Fruta on the basis of direct labor-hours. Variable manufacturing overhead costs during June totaled $4,800.


 

The company's management is anxious to determine the efficiency of Fruta production activities.


 

Required:
1. For direct materials:
a.

Compute the price and quantity variances.(Round your "price per pound" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
   

         

 

b.

The materials were purchased from a new supplier who is anxious to enter into a long term purchase contract. Would you recommend that the company sign the contract?
   
 
Yes
No


 

2. For labor employed in the production of Fruta:


 

a.

Compute the rate and efficiency variances. (Round your "rate per hour" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
   

         

 

b.
 

In the past, the 15 persons employed in the production of Fruta consisted of 6 senior workers and 9 assistants. During June, the company experimented with 8 senior workers and 7 assistants. Would you recommend that the new labor mix be continued?
   
 
Yes
No


 

3a.

Compute the variable overhead rate and efficiency variances.(Round your "rate per hour" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
   

 

Answers

CourseLover
(12)
Status NEW Posted 23 Dec 2017 07:12 AM My Price 10.00

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