Exercise 11-30 (Algorithmic FITB)

Thorndark, Inc., produces sandals. Data for the second quarter are as follows:

Master Budget / Actual Data
Budgeted production: / 4,200 / Actual production: / 4,300 units
Materials: / 2 leather strips @ $6 / Materials cost: / $48,200
Labor: / 0.5 hr. @ $18.25 / Labor cost: / $35,400

Calculate the flexible budget cost of materials.If required, round your answer to the nearest dollar.
$

Exercise 10-28 (Algorithmic)
Budget Variances, Materials and Labor

Bolsa Corporation produces high-quality leather belts. The company's plant in Boise uses a standard costing system and has set the following standards for materials and labor:

Leather (4 strips @ $6) / $24
Direct labor (1.5 hr. @ $12) / $18
Total prime cost / $42

During the first month of the year, Boise plant produced 33,000 belts. Actual leather purchased was 140,000 strips at $3.30 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 37,000 hours at $10.00 per hour.

1. Compute the costs of leather and direct labor that should be incurred for the production of 33,000 leather belts.

Materials / $
Labor / $

2. Compute the total budget variances for materials and labor.

Variance
Materials / $ / Select Favorable Unfavorable Item 4
Labor / $ / Select Favorable Unfavorable Item 6

3. Would you consider these variances material with a need for investigation?

Explain.

Exercise 10-30
Labor Variances

Bolsa Corporation produces high-quality leather belts. The company's plant in Boise uses a standard costing system and has set the following standards for materials and labor:

During the first month of the year, Boise plant produced 40,000 belts. Actual leather purchased was 125,000 strips at $3.60 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 34,000 hours at $12.50 per hour.

1. Break down the total variance for labor into a rate variance and an efficiency variance using the columnar and formula approaches.

Rate Variance: / $ / Select Favorable Unfavorable Item 2
Efficiency Variance: / $ / Select Favorable Unfavorable Item 4
Total Variance: / $ / Select Favorable Unfavorable Item 6

2. As part of the investigation of the unfavorable variances, the plant manager interviews the production manager. The production manager complains strongly about the quality of the leather strips. He indicates that the strips are of lower quality than usual and that workers have to be more careful to avoid a belt with cracks and more time is required. Also, even with extra care, many belts have to be discarded and new ones produced to replace the rejects. This replacement work has also produced some overtime demands. What corrective action should the plant manager take?

The input in the box below will not be graded, but may be reviewed and considered by your instructor.

Exercise 10-33
Materials and Labor Variances

At the beginning of the year, Shults Company had the following standard cost sheet for one of its plastic products:

The actual results for the year are as follows:

  1. Units produced: 350,000.
  2. Materials purchased: 1,860,000 pounds @ $5.10.
  3. Materials used: 1,850,000 pounds.
  4. Direct labor: 725,000 hours @ $11.85.

1. Compute price and usage variances for materials.

Material Price Variance: / $ / Select Favorable Unfavorable Item 2
Material Usage Variance: / $ / Select Favorable Unfavorable Item 4

2. Compute the labor rate and labor efficiency variances.

Labor Rate Variance: / $ / Select Favorable Unfavorable Item 6
Labor Efficiency Variance: / $ / Select Favorable Unfavorable Item 8

Exercise 10-32 (Algorithmic)
Labor Variances

Verde Company produces wheels for bicycles. During the year, 660,000 wheels were produced. The actual labor used was 362,000 hours at $9.80 per hour. Verde has the following labor standard: 0.49 hour at $10.30.

1. Compute the labor rate variance.
$

2. Compute the labor efficiency variance.
$

Exercise 11-33
Performance Report Based on Actual Production

Ionia Inc. produces a variety of shampoos, conditioners, and hair care products. Ionia's controller has developed standard costs for the following four overhead items:

Assume that Ionia's actual production required 142,000 direct labor hours at standard. The actual overhead costs incurred were as follows:

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Complete the performance report for the period based on actual production. In the variance type column, type "F" for favorable and "U" for unfavorable. If the variance is zero, enter ("0") in the variance amount column and "N" for neither in the variance type column. (Note: Be sure to use capital letters.)
Performance Report
/ Actual
/ Budgeted
/ Variance:
AmountType (F,U,N)
Direct labor hours based on actual
/ Correct 7
/ Correct 8
/ Correct 9
/ Correct 10
Variable overhead:
Maintenance
/ $
Correct 13
/ $
Correct 14
/ $
Correct 15
/ Correct 16
Power
/ Correct 18
/ Correct 19
/ Correct 20
/ Correct 21
Indirect labor
/ Correct 23
/ Correct 24
/ Correct 25
/ Correct 26
Rent
/ Correct 28
/ Correct 29
/ Correct 30
/ Correct 31
Total overhead
/ $
Correct 33
/ $
Correct 34
/ $
Correct 35
/ Correct 36