Chapter 23

Hickory Furniture Company manufactures unfinished oak furniture. Hickory use: standard cost system. The direct labor, direct materials, and factory overhead standar for an unfinished dining room table are as follows: \(\begin{array}{lll}\text { Direct labor: } & \text { standard rate } & \$ 18.00 \text { per hr. } \\ \text { standard time per unit } & 2.5 \mathrm{hrs} . \\ \text { Direct materials (oak): } & \text { standard price } & \$ 9.50 \text { per bd. ft. } \\ \text { Variable factory overhead: } & \text { standard quantity } & 18 \text { bd. ft. } \\ \text { Fixed factory overhead: } & \text { standard rate } & \$ 280 \text { per direct labor hr. } \\\ & \$ 1.20 \text { per direct labor hr. }\end{array}\) Determine the standard cost per dining room table.

The following data relate to the direct materials cost for the production of 2,000 automobile tires: Actual: 54,600 lbs. at \(1.80 \)98,280 Standard: 53,400 lbs. at \(1.85 \)98,790 a. Determine the price variance, quantity variance, and total direct materials cost variance. b. To whom should the variances be reported for analysis and control?

I-Time, Inc., produces electronic timepieces. The company uses mini-LCD displays for its products. Each timepiece uses one display. The company produced 550 timepieces during March. However, due to LCD defects, the company actually used 570 LCD displays during March. Each display has a standard cost of \(9.20. Six hundred LCD displays were purchased for March production at a cost of \)6,000. Determine the price variance, quantity variance, and total direct materials cost variance for March.

The following data relate to labor cost for production of 5,500 cellular telephones: \(\begin{array}{lll}\text { Actual: } & 3,650 \text { hrs. at } \$ 15.20 & \$ 55,480 \\ \text { Standard: } & 3,710 \text { hrs. at } \$ 15.00 & \$ 55,650\end{array}\) a. Determine the rate variance, time variance, and total direct labor cost variance. Discuss what might have caused these variances.

Alpine Bicycle Company manufactures mountain bikes. The following data for May of the current year are available: \(\begin{array}{lr}\text { Quantity of direct labor used } & 600 \mathrm{hrs} . \\\ \text { Actual rate for direct labor } & \$ 12.50 \text { per hr. } \\\ \text { Bicycles completed in May } & 280 \\ \text { Standard direct labor per bicycle } & 2 \mathrm{hrs} . \\ \text { Standard rate for direct labor } & \$ 2.75 \text { per hr. } \\ \text { Planned bicycles for May } & 310\end{array}\) a. Determine the direct labor rate and time variances. b. How much direct labor should be debited to Work in Process?

The Freedom Clothes Company produced 18,000 units during June of the current year. The Cutting Department used 3,500 direct labor hours at an actual rate of \(12.10 per hour. The Sewing Department used 5,800 direct labor hours at an actual rate of \)11.80 per hour. Assume there were no work in process inventories in either department at the beginning or end of the month. The standard labor rate is $12.00. The standard labor time for the Cutting and Sewing departments is 0.20 hour and 0.30 hour per unit, respectively a. Determine the direct labor rate and time variance for the (1) Cutting Department and (2) Sewing Department. b. Interpret your results.

St. Luke Hospital began using standards to evaluate its Admissions Department. The standard was broken into two types of admissions as follows: \begin{tabular}{lc} Type of Admission & Standard Time to Complete Admission Record \\ \cline { 2 - 3 } Unscheduled admission & 40 min. \\ Scheduled admission & \(10 \mathrm{~min} .\) \end{tabular} The unscheduled admission took longer, since name, address, and insurance information needed to be determined at the time of admission. Information was collected on scheduled admissions prior to the admissions, which was less time consuming. The Admissions Department employs two full-time people (40 productive hours per week, with no overtime) at \(\$ 18\) per hour. For the most recent week, the department handled 66 unscheduled and 240 scheduled admissions. a. How much was actually spent on labor for the week? b. What are the standard hours for the actual volume for the week? c. Calculate a time variance, and report how well the department performed for the week.

One of the operations in the U.S. Post Office is a mechanical mail sorting operation. In this operation, letter mail is sorted at a rate of one letter per second. The letter is mechanically sorted from a three-digit code input by an operator sitting at a keyboard. The manager of the mechanical sorting operation wishes to determine the number of temporary employees to hire for December. The manager estimates that there will be an additional \(34,560,000\) pieces of mail in December, due to the upcoming holiday season. Assume that the sorting operators are temporary employees. The union contract requires that temporary employees be hired for one month at a time. Each temporary employee is hired to work 150 hours in the month. a. How many temporary employees should the manager hire for December? b. If each employee earns a standard \(\$ 18\) per hour, what would be the labor time variance if the actual number of letters sorted in December was \(33,840,000\) ?

At the beginning of October, Cornerstone Printers Company budgeted 16,000 books to be printed in October at standard direct materials and direct labor costs as follows: \begin{tabular}{lr} Direct materials & \(\$ 24,000\) \\ Direct labor & 8,000 \\ Total & \(\$ 32,000\) \\ \hline \end{tabular} The standard materials price is \(\$ 0.60\) per pound. The standard direct labor rate is \(\$ 10\) per hour. At the end of October, the actual direct materials and direct labor costs were as follows: \begin{tabular}{lr} Actual direct materials & \(\$ 21,600\) \\ Actual direct labor & 7,200 \\ Total & \(\$ 28,800\) \\ \hline \end{tabular} There were no direct materials price or direct labor rate variances for October. In addition, assume no changes in the direct materials inventory balances in October. Cornerstone Printers Company actually produced 14,000 units during October. Determine the direct materials quantity and direct labor time variances.

Western Wood Products Company prepared the following factory overhead cost budget for the Press Department for February 2010, during which it expected to require 10,000 hours of productive capacity in the department: \begin{tabular}{lrr} Variable overhead cost: & & \\ Indirect factory labor & \(\$ 27,500\) & \\ Power and light & 2,600 & \\ Indirect materials & & \\ Total variable cost & \(\$ 54,100\) \\ Fixed overhead cost: & \(\$ 42,000\) & \\ Supervisory salaries & 40,000 & \\ Depreciation of plant and equipment & 12,000 & \\ Insurance and property taxes & & \\ Total fixed cost & & 94,000 \\ \hline Total factory overhead cost & \(\$ 148,100\) \\ \hline \end{tabular} Assuming that the estimated costs for March are the same as for February, prepare a flexible factory overhead cost budget for the Press Department for March for 8,000 , 10,000 , and 12,000 hours of production.

The following data relate to factory overhead cost for the production of 5,000 computers: \(\begin{array}{llr}\text { Actual: } & \text { Variable factory overhead } & \$ 125,000 \\ & \text { Fixed factory overhead } & 34,000 \\ \text { Standard: } & 5,000 \text { hrs. at } \$ 30 & 150,000\end{array}\) If productive capacity of \(100 \%\) was 8,000 hours and the factory overhead cost budgeted at the level of 5,000 standard hours was \(\$ 162,750\), determine the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was \(\$ 4.25\) per hour.

Perma Weave Textiles Corporation began January with a budget for 30,000 hours of production in the Weaving Department. The department has a full capacity of 40,000 hours under normal business conditions. The budgeted overhead at the planned volumes at the beginning of January was as follows: \begin{tabular}{lr} Variable overhead & \(\$ 75,000\) \\ Fixed overhead & 52,000 \\ \hline Total & \(\$ 127,000\) \\ \hline \end{tabular} The actual factory overhead was \(\$ 128,500\) for January. The actual fixed factory overhead was as budgeted. During January, the Weaving Department had standard hours at actual production volume of 31,000 hours. a. Determine the variable factory overhead controllable variance. b. Determine the fixed factory overhead volume variance.

Scientific Molded Products Inc. prepared the following factory overhead cost budget for the Trim Department for August 2010 , during which it expected to use 10,000 hours for production: Scientific Molded Products has available 15,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During August, the Trim Department actually used 11,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for August was as follows: \begin{tabular}{lr} Actual variable factory overhead cost: & \\ Indirect factory labor & \(\$ 27,000\) \\ Power and light & 4,000 \\ Indirect materials & 13,500 \\ \hline Total variable cost & \(\$ 44,500\) \\ \hline \end{tabular} Construct a factory overhead cost variance report for the Trim Department for August.

Orion Manufacturing Company incorporates standards in its accounts and identifies variances at the time the manufacturing costs are incurred. Journalize the entries to record the following transactions: a. Purchased 1,700 units of copper tubing on account at \(54.50 per unit. The standard price is \)56.00 per unit. b. Used 1,000 units of copper tubing in the process of manufacturing 120 air conditioners. Eight units of copper tubing are required, at standard, to produce one air conditioner.

The Assembly Department produced 2,000 units of product during June. Each unit required 1.5 standard direct labor hours. There were 3,200 actual hours used in the Assembly Department during June at an actual rate of \(14.00 per hour. The standard direct labor rate is \)15 per hour. Assuming direct labor for a month is paid on the fifth day of the following month, journalize the direct labor in the Assembly Department on June 30.

The following data were taken from the records of Parrott Company for December 2010: \(\begin{array}{lr}\text { Administrative expenses } & \$ 72,000 \\ \text { Cost of goods sold (at standard) } & 345,000 \\ \text { Direct materials price variance - favorable } & 900 \\ \text { Direct materials quantity variance-favorable } & 1,200 \\ \text { Direct labor rate variance- unfavorable } & 500 \\ \text { Direct labor time variance-favorable } & 450 \\\ \text { Variable factory overhead controllable variance-favorable } & 250 \\\ \text { Fixed factory overhead volume variance-unfavorable } & 3,200 \\\ \text { Interest expense } & 2,250 \\ \text { Sales } & 580,000 \\ \text { Selling expenses } & 85,800\end{array}\) Prepare an income statement for presentation to management.

Under Par, Inc., is an Internet retailer of golf equipment. Customers order golf equipment from the company, using an online catalog. The company processes these orders and delivers the requested product from its warehouse. The company wants to provide customers with an excellent purchase experience in order to expand the business through favorable word-of-mouth advertising and to drive repeat business. To help monitor performance, the company developed a set of performance measures for its order placement and delivery process. Average computer response time to customer "clicks" Dollar amount of returned goods Elapsed time between customer order and product delivery Maintenance dollars divided by hardware investment Number of customer complaints divided by the number of orders Number of misfilled orders divided by the number of orders Number of orders par warehouse employee Number of page faults or errors due to software programming errors Number of software fixes per week Server (computer) downtime Training dollars per programmer a. For each performance measure, identify it as either an input or output measure related to the "order placement and delivery" process. b. Provide an explanation for each performance measure.

Tri-County College wishes to monitor the efficiency and quality of its course registration process. a. Identify three input and three output measures for this process. b. Why would Tri-County College use nonfinancial measures for monitoring this process?