Assignment
Santa's Workshop Company has established two monthly budgets. But there is some conflict as to which budget should be used. Santa believes the estimate should incorporate a longer range approach. The long-range approach would have an average of 13,440 direct labor expected to be used the next year. The head elf insists on using a short range approach and change capacity based on monthly estimate. The estimate for the month in question is 1,360 direct labor hours. Since Santa believes he is in charge, he tells the accounting department to use his approach for the budgeted hours. The two budgets are as follows:
Product Direct Labor Total Budgeted
Units Hours Overhead
700 1,120 $15,346
850 1,360 $16,714
Standard cost per unit:
Material (2.5 pounds @ $3.70 per lb.) $ 9.25
Labor (1.6 h..s@$9.75 per hr) $15.60
Overhead (1.6 hours @ ???) ??????
Analysis of the actual factory data show the following (none has been recorded):
Production:
Beginning units in process (30% complete conversion) 20 units
Transferred to finished goods 625 units
Ending units in process (65% complete conversion) 40 units
Material used during the month 1,710 pounds
Material purchased during the month 2,200 pounds costing $8,250
Labor used 1,132 hours costing $11,321
Variable Factory overhead $6,839
Fixed factory overhead $8,796
Santa's workshop uses the FIFO method
Required:
a. Find the amount transferred to finished goods.
b. Find the material quantity and price variance.
c. Find the labor efficiency and rate variance
d. Find the factory overhead variances (four variance method)
e. Make the required journal entries.