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Chapter 23: 24E (page 1265)

McCarthy Fender, which uses a standard cost system, manufactured 20,000 boat fenders during 2018. The 2018 revenue and cost information for McCarthy follows:

Sales Revenue \( 1,300,000

Cost of Goods Sold (at standard) 196,800

Direct materials cost variance 7,150 F

Direct materials efficiency variance 5,950 U

Direct labor cost variance 400 U

Direct labor efficiency variance 530 F

Variable overhead cost variance 650 U

Variable overhead efficiency variance 360 F

Fixed overhead cost variance 2,350 U

Fixed overhead volume variance 4,410 U

Assume each fender produced was sold for the standard price of \)65, and total selling and administrative costs were $250,000. Prepare a standard cost income statement for 2018 for McCarthy Fender

Short Answer

Expert verified

The standard cost income statement is prepared with an operating income of $847,480.

Step by step solution

01

Definition of Sales Revenue

The sales revenue is defined as the amount of cash gained by the firm for the goods sold.

02

Preparation of actual cost car

McDonald Outfitter Inc

Standard Cost Income Statement

For the month ended May 31, 2018

Amount ($)

Amount ($)

Amount ($)

Sales Revenue (At standard)

1,300,000

Cost of goods sold (At standard)

196,800

Manufacturing Variance:

Direct Material Cost Variance

-7,150

Direct material Efficiency Variance

5,950

Direct Labor cost Variance

400

Direct Labor Efficiency Variance

-530

Variable Overhead Cost Variance

650

Variable Overhead Efficiency Variance

-360

Fixed Overhead Cost Variance

2,350

Fixed Overhead Volume Variance

4,410

Total Manufacturing Variances

5,720

Cost of goods sold (At Actual)

202,520

Gross Profit

1,097,480

Less: Selling and Administrative expenses

-250,000

Operating Income

847,480

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Most popular questions from this chapter

Question:Tipton Company manufactures shirts. During June, Tipton made 1,200 shirts and gathered the following additional data:

Direct materials cost standard \(6.00 per yard of fabric

Direct materials efficiency standard 1.50 yards per shirt

Actual amount of fabric purchased and used 1,680 yards

Actual cost of fabric purchased and used \)10,500

Direct labor cost standard \(15.00 per DLHr

Direct labor efficiency standard 2.00 DLHr per shirt

Actual amount of direct labor hours 2,520 DLHr

Actual cost of direct labor \)36,540

Calculate the following variances:

7. Direct materials cost variance

8. Direct materials efficiency variance

9. Total direct materials variance

10. Direct labor cost variance

11. Direct labor efficiency variance

12. Total direct labor variance

Journalizing materials entries

The following direct materials variance analysis was performed for Moore.

Requirements

1. Record Moore’s direct materials journal entries. Assume purchases were made on the account.

2. Explain what management will do with this variance information

Preparing a flexible budget and performance report

This continues the Piedmont Computer Company situation from Chapter 22. Assume Piedmont Computer Company has created a standard cost card for the PCC model tablet computer, with overhead allocated based on direct labor hours:

Direct materials

\( 300 per tablet

Direct labor

3 hours per tablet at \)26 per hour

Variable overhead

3 hours per tablet at \(5 per hour

Fixed overhead

\)54,000 per month

During the month of September, Piedmont Computer Company incurred the following costs while manufacturing 1,100 PCC model tablets:

Direct material

\(341,000

Direct labor

88,000

Variable overhead

17,600

Fixed overhead

56,320

Requirements

1. Prepare a flexible budget for September for 900, 1,000, and 1,100 PCC model tablets. The tablet has a standard sales price of \)675. List variable costs separately.

2. Using 1,000 PCC model tablets for the static budget, prepare a flexible budget performance report for September. Total sales revenue for the month was $767,800. The company sold 1,100 tablets.

3. What insights can the management of Piedmont Computer Company draw from the performance report?

Question:List the direct materials variances, and briefly describe each.

Marsh Company uses a standard cost system and reports the following information for 2018:

Standards:

3 yards of cloth per unit at \(1.05 per yard

2 direct labor hours per unit at \)10.50 per hour

Overhead allocated at \(5.00 per direct labor hour

Actual:

2,600 yards of cloth were purchased at \)1.10 per yard

Employees worked 1,800 hours and were paid \(10.00 per hour

Actual variable overhead was \)1,700

Actual fixed overhead was \(7,300

Direct materials cost variance \) 130 U

Direct materials efficiency variance 420 F

Direct labor cost variance 900 F

Direct labor efficiency variance 2,100 F

Variable overhead cost variance 1,500 U

Variable overhead efficiency variance 1,500 F

Fixed overhead cost variance 600 U

Fixed overhead volume variance 1,600 F

Marsh produced 1,000 units of finished product in 2018. Record the journal entries to record direct materials, direct labor, variable overhead, and fixed overhead, assuming all expenditures were on account and there were no beginning or ending balances in the inventory accounts (all materials purchased were used in production, and all goods produced were sold). Record the journal entries to record the transfer to Finished Goods Inventory and Cost of Goods Sold (omit the journal entry for Sales Revenue). Adjust the Manufacturing Overhead account
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