Work4Me Managerial Accounting Simulations. Problem Eight

Transcription

1 Work4Me Managerial Accounting Simulations 1 st Web-Based Edition Problem Eight Standard Costing and Variances South Yuba Milling Company Page 1

2 INTRODUCTION You will enter Transactions involving (1) the purchase of raw materials and the Transfer of the raw materials to work-in-process inventory, recognizing direct material price and direct material quantity variances, and (2) the actual cost of direct labor, recognizing labor rate and labor efficiency variances for the South Yuba Milling Company. For this problem, the Chart of Accounts is limited to key accounts related to this problem. CHART OF ACCOUNTS ASSETS 101 Cash 115 Finished-Goods Inventory 117 Raw-Material Inventory 119 Work-in-Process Inventory 127 Factory Supplies 131 Factory Equipment 132 Accum. Depreciation Factory Equipment 140 Factory 142 Accum. Depreciation Factory LIABILITIES 201 Accounts Payable 205 Wages Payable 209 Income Taxes Payable 210 Short-Term Notes Payable 240 Mortgage Note Payable 301 Common Stock 303 Preferred Stock 401 Sales STOCKHOLDER EQUITY ACCOUNTS REVENUE ACCOUNTS Page 2

3 EXPENSE ACCOUNTS 501 Cost of Goods Sold 502 Manufacturing Overhead 503 Direct-Material Price Variance 505 Direct-Material Quantity Variance 507 Direct-Labor Rate Variance 509 Direct-Labor Efficiency Variance 511 VOH Spending Variance 512 VOH Efficiency Variance 514 FOH Budget Variance 515 FOH Volume Variance 601 Selling Expenses 701 Administrative Expenses 810 Income Tax Expense 901 Income Summary SUMMARY ACCOUNTS Accounts #514 and #515 are used in Problem 9 Flexible Budgeting and Overhead. Established Standards Cost Item Price per Unit or Rate per Unit Quantity Required per Unit of Finished Product Direct Material $1.50 per unit 2 units Direct Labor $18.00 per hour 2 hours The following formulas for variances are applied: Direct-material price variance is computed at the time of purchase. It is the difference between the actual price (AP) and the standard price (SP) of the per unit price of direct material multiplied times the actual quantity (AQ) of material purchased. AQ(AP SP) = Direct-Material Price Variance Direct-material quantity variance is computed at the time of issue to production. It is the difference between the actual quantity used (AQ) and the standard quantity allowed (SQ) multiplied times the standard price (SP) per unit. SP(AQ SQ) = Direct-Material Quantity Variance. Page 3

4 Direct-labor rate variance is computed at the time direct-labor payroll is recorded. It is the difference between the actual rate (AR) and the standard rate (SR) per direct-labor hour multiplied times the actual hours (AH) used. AH(AR SR) = Direct-Labor Rate Variance Direct-labor efficiency variance is computed at the time direct-labor payroll is recorded. It is the difference between the actual hours used (AH) and the standard hours allowed (SH) multiplied times the standard rate per direct-labor hour (SR). SR(AH SH) = Direct-Labor Efficiency Variance The direct-material variances and the direct-labor variances are favorable when the actual price, actual hours, or actual rates are less than the standards price, hours, or rates. The direct-material variances, the direct-labor variances are unfavorable when the actual price, actual hours, or actual rates exceed the standards price, hours, or rates. All of the direct-material variances and direct-labor variances are closed to the Cost of Goods Sold at the end of the accounting period. Log on to Work4Me II and from the Problems Menu Bar select Problem 8: Standard Costing and Variances. Click on Journals/Ledger/Statement and select General Ledger. Print the beginning Trial Balance. Click on Data Entry and record the following Transactionsactions: Page 4

5 RECORD THE MONTHLY TRANSACTIONSACTIONS In the Date column of the Data Entry page, enter each Transaction as TRAN Transaction 01: Purchase raw materials Five thousand units of raw material were purchased on credit for $7,400. Record the purchase of the raw materials and the direct materials price variance. At the Invoice prompt type PURRM. Transaction 02: Transfer raw materials to a production department Record the Transfer of 5,300 units of raw materials to work in process. The production department completed 2,550 units of finished goods with the 5,300 units of raw materials. Record the Transfer of raw materials to work in process and the material quantity variance. At the Invoice prompt type TRNDM. Transaction 03: Accrue labor cost Two thousand five hundred and fifty (2,550) were completed. Labor cost was $95,000 for the 5,000 hours of direct labor at $19 per direct-labor hour. Record the payroll for the time period and the labor rate variance and labor efficiency variance. At the Invoice prompt enter ACLAB. Transaction 04: Record the payment of the labor payable Record the payment of the payroll liability with check At the invoice prompt, type PAYRL. Page 5

6 Click on Journals/Ledgers/Statements, select General Ledger and Print a Trial Balance and check your account totals against the Check It Out box. CHECK IT OUT 101 Cash $75, Raw Materials Inventory 5, Direct-Material Price Variance Direct-Material Quantity Variance Direct-Labor Rate Variance 5, TRIAL BALANCE TOTAL $560, If your account balances are in agreement with the Check It Out box, then continue. If your account balances are not in agreement, then print a copy of your General Journal and compare your entries with the data entry information and make appropriate correcting entries. Transaction 05: Close the direct-material variance accounts Close the direct-material variance accounts into the Cost of Goods Sold account. At the Invoice prompt type DMVAR. Transaction 06: Close the direct-labor variance accounts Close the direct-labor variance accounts into the Cost of Goods Sold account. At the Invoice prompt type DLVAR. ************************ Click on Journals/Ledgers/Statements, select General Ledger and Print the Trial Balance. The trial balance total should be $558, Click on Ledger Card and select from the pull-down menu account 501 Cost of Goods Sold. Click on Show Ledger Card. Print the ledger card. Complete the exam on this Problem. Print the Trial Balance and answer the following questions. Page 6

7 MANAGERIAL WORK4ME NAME PROBLEM 8 CLASS DAY AND TIME DATE STANDARD COSTING AND VARIANCES 1. What is the net total of the direct-material variances? $ 2. What is the net total of the direct-labor variances? $ 3. The direct-materials price variance is best controlled by which of the following? A. Production supervisor B. Purchasing supervisor C. Warehouse supervisor D. Direct-labor employees 4. The direct-labor efficiency variance is best controlled by which of the following? A. Production supervisor B. Purchasing supervisor C. Warehouse supervisor D. Direct-labor employees 5. The direct-material quantity variance is best controlled by which of the following? A. Production supervisor B. Purchasing supervisor C. Warehouse supervisor D. Direct-labor employees 6. The purchase of an inferior quality of direct material at a less than the standard per unit cost will likely cause interrelated variances among which of the following? A. Direct-material price variance B. Direct-material quantity variance C. Direct-labor rate variance D. Direct-labor efficiency variance E. All of the above Page 7

8 MANAGERIAL WORK4ME PROBLEM 8 7. Is it possible the purchase of a superior quality of direct material at a greater than the standard per unit cost will create enough overall favorable variances to warrant the purchase? A. Yes B. No 8. What is the balance of the Cost of Goods Sold account after closing the variance accounts? 9. If the actual direct materials cost had been 6,000 units for $9,180, what would be the direct-material price variance? 10. If the actual direct labor cost had been 5,200 direct-labor hours for $96,200, what would have been the direct-labor rate variance? $ $ $ Page 8