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 |
1.7 pounds |
$ |
6.50 |
per pound |
$ |
11.05 |
| Direct labor |
0.8 hours |
$ |
11.90 |
per hour |
|
9.52 |
| Variable manufacturing overhead |
0.8 hours |
$ |
2.80 |
per hour |
|
2.24 |
| |
|
|
|
|
|
|
|
|
|
|
|
$ |
22.81 |
| |
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| During June, the company recorded this activity related to production of Fruta: |
| a. |
The company produced 3,500 units during June.
|
| b. |
A total of 9,500 pounds of material were purchased at a cost of $58,900. |
| c. |
There was no beginning inventory of materials; however, at the end of the month, 2,500 pounds of material remained in ending inventory.
|
| d. |
The company employs 10 persons to work on the production of Fruta. During June, they worked an average of 230 hours at an average rate of $12.50 per hour.
|
| e. |
Variable manufacturing overhead is assigned to Fruta on the basis of direct labor-hours. Variable manufacturing overhead costs during June totaled $5,750.
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| The company's management is anxious to determine the efficiency of Fruta production activities. |
| a. |
Compute the price and quantity variances. (Input all amounts as positive values. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)
|
|
|
|
| Materials price variance |
$ |
(Click to select)FNoneU |
| Materials quantity variance |
$ |
(Click to select)FUNone |
|
| 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?
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| 2. |
For labor employed in the production of Fruta: |
| a. |
Compute the rate and efficiency variances. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)
|
|
|
|
| Labor rate variance |
$ |
(Click to select)NoneUF |
| Labor efficiency variance |
$ |
(Click to select)FUNone |
|
| b. |
In the past, the 10 persons employed in the production of Fruta consisted of 4 senior workers and 6 assistants. During June, the company experimented with 5 senior workers and 5 assistants. Would you recommend that the new labor mix be continued?
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| 3a. |
Compute the variable overhead rate and efficiency variances. (Input all amounts as positive values. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)
|
|
|
|
| Variable overhead rate variance |
$ |
(Click to select)NoneUF |
| Variable overhead efficiency variance |
$ |
(Click to select)UNoneF |