Tuna Company set the following standard unit costs for its single product.

Tuna Company set the following standard unit costs for its single product.    

Direct materials (26 Ibs. @ $3 per Ib.)	$	78.00
Direct labor (6 hrs. @ $6 per hr.)		36.00
Factory overhead—variable (6 hrs. @ $4 per hr.)		24.00
Factory overhead—fixed (6 hrs. @ $5 per hr.)		30.00
Total standard cost	$	168.00

 

The predetermined overhead rate is based on a planned operating volume of 70% of the productive capacity of 40,000 units per quarter. The following flexible budget information is available.

 

	Operating Levels
		60%		70%		80%
Production in units		24,000		28,000		32,000
Standard direct labor hours		144,000		168,000		192,000
Budgeted overhead
Fixed factory overhead	$	840,000	$	840,000	$	840,000
Variable factory overhead	$	576,000	$	672,000	$	768,000

 

During the current quarter, the company operated at 80% of capacity and produced 32,000 units of product; actual direct labor totaled 186,000 hours. Units produced were assigned the following standard costs:

 

Direct materials (832,000 Ibs. @ $3 per Ib.)	$	2,496,000
Direct labor (192,000 hrs. @ $6 per hr.)		1,152,000
Factory overhead (192,000 hrs. @ $9 per hr.)		1,728,000
Total standard cost	$	5,376,000

 

Actual costs incurred during the current quarter follow:

   

Direct materials (827,000 Ibs. @ $3.10)	$	2,563,700
Direct labor (186,000 hrs. @ $5.75)		1,069,500
Fixed factory overhead costs		1,649,434
Variable factory overhead costs		1,544,151
Total actual costs	$	6,826,785

1. Compute the direct materials cost variance, including its price and quantity variances

Explanation:   Direct Materials Variances 

Direct materials cost variances
Actual units at actual cost [827,000 lbs. @ $3.10]	$	2,563,700
Standard units at standard cost [832,000 lbs. @ $3.00]		2,496,000
Direct material cost variance	$	67,700	U

 

Direct Materials Price and Quantity Variances
Actual Cost AQ × AP			AQ × SP			Standard Cost SQ × SP
827,000 × $3.10			827,000 × $3.00			832,000 × $3.00
$2,563,700			$2,481,000			$2,496,000
	$82,700 U            (Price variance)			$15,000 F          (Quantity variance)
			$67,700 U (Total materials variance)

2. Compute the direct labor variance, including its rate and efficiency variances.

  Direct Labor Variances

Direct labor cost variances
Actual units at actual cost [186,000 hrs. @ $5.75]	$	1,069,500
Standard units at standard cost [192,000 hrs. @ $6.00]		1,152,000
Direct labor cost variance	$	82,500	F

Direct Labor Rate and Efficiency Variances
Actual Cost AH × AR			AH × SR			Standard Cost SH × SR
186,000 × $5.75			186,000 × $6.00			192,000 × $6.00
$1,069,500			$1,116,000			$1,152,000
	$46,500 F            (Rate variance)			$36,000 F          (Efficiency variance)
			$82,500 F (Total labor variance)

3. Compute the overhead controllable and volume variances.

Explanation:   Overhead Variances 

Controllable variance
Actual overhead [$1,649,434 + $1,544,151]	$	3,193,585
Applied overhead [from flexible budget, 80% capacity]		1,608,000
Controllable variance	$	1,585,585	U

 

Fixed overhead volume variance
Budgeted fixed overhead [given, at 80% capacity]	$	840,000
Fixed overhead cost applied [192,000 hrs. @ $5]		960,000
Fixed overhead volume variance	$	120,000	F

Business Solutions’ second quarter 2012 fixed budget performance report for its computer furniture operations follows. The $156,000 budgeted expenses include $108,000 in variable expenses for desks and $18,000 in variable expenses for chairs, as well as $30,000 fixed expenses. The actual expenses include $31,000 fixed expenses.

Business Solutions’ second quarter 2012 fixed budget performance report for its computer furniture operations follows. The $156,000 budgeted expenses include $108,000 in variable expenses for desks and $18,000 in variable expenses for chairs, as well as $30,000 fixed expenses. The actual expenses include $31,000 fixed expenses.

	Fixed Budget		Actual Results		Variances
Desk sales (in units)		144		150
Chair sales (in units)		72		80
Desk sales (in dollars)	$	180,000	$	186,000	$	6,000 F
Chair sales (in dollars)	$	36,000	$	41,200	$	5,200 F
Total expenses	$	156,000	$	163,880	$	7,880 U
Income from operations	$	60,000	$	63,320	$	3,320 F

Prepare a flexible budget performance report that shows any variances between budgeted results and actual results. List fixed and variable expenses separately.
 
Explanation:

Supporting computations
Total budgeted desk sales	$	180,000
Total units budgeted		144
Budgeted selling price	$	1,250	per unit
Flexible budget units		150
Flexible budget sales	$	187,500
Total budgeted chair sales	$	36,000
Total units budgeted		72
Budgeted selling price	$	500	per unit
Flexible budget units		80
Flexible budget sales	$	40,000
Total budgeted variable costs for desks	$	108,000
Total units budgeted		144
Budgeted variable expenses per desk	$	750
Flexible budget units		150
Flexible budget variable expenses for desks	$	112,500
Total budgeted variable costs for chairs	$	18,000
Total units budgeted		72
Budgeted variable expenses per chair	$	250
Flexible budget units		80
Flexible budget variable expenses for chairs	$	20,000
Total budgeted variable expenses*	$	132,500
Total actual expenses	$	163,880
Actual fixed expenses		31,000
Actual variable expenses	$	132,880

*($112,500 + $20,000), from calculation above

Smith Distributors, Inc., supplies ice cream shops with various toppings for making sundaes. On November 17, 2013, a fire resulted in the loss of all of the toppings stored in one section of the warehouse. The company must provide its insurance company with an estimate of the amount of inventory lost. The following information is available from the company's accounting records:

Smith Distributors, Inc., supplies ice cream shops with various toppings for making sundaes. On November 17, 2013, a fire resulted in the loss of all of the toppings stored in one section of the warehouse. The company must provide its insurance company with an estimate of the amount of inventory lost. The following information is available from the company's accounting records:

	Fruit Toppings			Marshmallow Toppings			Chocolate Toppings
Inventory, January 1, 2013	$	10,000		$	6,000		$	2,000
Net purchases through Nov. 17		100,000			26,000			11,000
Net sales through Nov. 17		150,000			45,000			19,000
Historical gross profit ratio		35	%		40	%		40	%

Required:
1.	Calculate the estimated cost of each of the toppings lost in the fire.

Campbell Corporation uses the retail method to value its inventory. The following information is available for the year 2013:

Campbell Corporation uses the retail method to value its inventory. The following information is available for the year 2013:

	Cost			Retail
Merchandise inventory, January 1, 2013	$	190,000		$	280,000
Purchases		600,000			840,000
Freight-in		8,000
Net markups					20,000
Net markdowns					4,000
Net sales					800,000

Required:

Determine the December 31, 2013, inventory that approximates average cost, lower of cost or market.   Explanation:   Cost-to-retail percentage: $798,000  = 70% $1,140,000

San Lorenzo General Store uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold. The following data are available for the month of October 2013:

San Lorenzo General Store uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold. The following data are available for the month of October 2013:

	Cost			Retail
Beginning inventory	$	35,000		$	50,000
Net purchases		19,120			31,600
Net markups					1,200
Net markdowns					800
Net sales					32,000

Required:

Calculate the table to estimate the average cost of ending inventory and cost of goods sold for October. Do not approximate LCM.   Explanation: Cost-to-retail percentage $54120  66% $82,000 Estimated ending inventory at cost = 66% × $50,000 = $33,000