Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 58

Find Actual and Budget Amounts from Variances

Assume that Timekiller, Inc., manufactures a new electronic game console. The current standard costs sheet for a game console follows:

Direct materials, ? kilograms at $4 per kilogram	$ ? per game
Direct labor, 0.75 hours at ? per hour	? per game
Overhead, 0.75 hours at ? per hour	? per game
Total costs	$39 per game

Assume that the following data appeared in Timekiller’s records at the end of the past month:

Actual production	24,000	units
Actual sales	15,000	units
Materials (112,500 kilograms)	$472,500
Materials price variance	22,500	U
Materials efficiency variance	18,000	U
Direct labor price variance	13,680	U
Direct labor (17,100 hours)	287,280
Underapplied overhead (total)	9,000	U

There are no materials inventories.

 Required

a. Prepare a variance analysis for direct materials and direct labor and complete the standard cost sheet.

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b. Assume that all production overhead is fixed and that the $9,000 underapplied is the only overhead variance that can be computed. What are the actual and applied overhead amounts?

Step 1 of 13

The total material variance is the sum of material price variance and material efficiency variance calculated as under: