Q1) Barberry, Inc., produces a product called Fruta. Company utilizes standard cost system and has established following standards for one unit of Fruta:
|
Standard Quantity |
Standard Price or Rate |
Standard Cost |
| Direct materials |
1.5 |
pounds |
$6.00 |
per pound |
$9.00 |
| Direct Labor |
0.6 |
hours |
$12.00 |
per hour |
7.20 |
| Variable manufacturing overhead |
0.6 |
hours |
$2.503 |
per hour |
1.50 |
|
|
|
|
|
$17.70 |
During June, company recorded this activity relative to production of Fruta:
a. Company produced 3,000 units during June.
b. Total of 8,000 pounds of material were bought at a cost of $46,000.
c. There was a no beginnign inventory of materials; though, at the end of month, 2,000 pounds of material remainded in ending inventory.
d. Company employs 10 persons to work on production of Fruta. In June, each worked average of 160 hours at an average rate of $12.50 per hour.
e. Variable manufacturing overhead is allocated to Fruta on the basis of direct labor-hours. Variable producing overhead costs during June totaled $3,600.
Company's management is anxious to find out the efficeincy of Fruta production activities.
For direct materials utilized in production of Fruta:
Materials were bought from new suppplier who is anxious to enter into long-term purchase contract. Would you suggest that company sign contract? Describe.