E25-2 Compute standard materials costs

Hank Itzek manufactures and sells homemade wine, and he wants to develop a standard cost
per gallon. The following are required for production of a 50-gallon batch.
3,000 ounces of grape concentrate at $0.06 per ounce
54 pounds of granulated sugar at $0.30 per pound
60 lemons at $0.60 each
50 yeast tablets at $0.25 each
50 nutrient tablets at $0.20 each
2,600 ounces of water at $0.005 per ounce

Hank estimates that 4% of the grape concentrate is wasted, 10% of the sugar is lost, and 25%
of the lemons cannot be used.

Instructions
Compute the standard cost of the ingredients for one gallon of wine. (Carry computations to
two decimal places.)
NOTE: Enter a number in cells requesting a value; enter either a number or a form

Ingredient

Amount per
gallon

Standard
Waste

Grape concentrate
Sugar

Value
Value

4%
10%

Lemons

Value

25%

Yeasst

Value

0%

Nutrient

Value

0%

Water

Value

0%

After you have completed the requirements of E25-2, consider this additional question.
1.

Assume the standard waste for grape concentrate, sugar and lemons changed to 5%,
How will these changes impact the standard cost of one gallon of wine?

ts to develop a standard cost

on batch.

% of the sugar is lost, and 25%

ine. (Carry computations to

either a number or a formula in cells with a "?" .

Standard
Usage

Standard
Price

Standard Cost
per Gallon

?
?

$0.06
0.30

?
?

0.60

0.25

0.20

0.005

Standard cost for one gallon of wine

question.

and lemons changed to 5%, 8% and 20% respectively.

gallon of wine?

E25-5 Compute materials price and quantity variance

The standard cost of Product B manufactured by MIT Company includes three units of direct m
$5.00 per unit. During June, 29,000 units of direct materials are purchased at a cost of $4.70
29,000 units of direct materials are used to produce 9,500 units of Product B.

Instructions
(a) Compute the total materials variance and the price and quantity variances.
(b) Repeat (a), assuming the purchase price is $5.15 and the quantity purchased and used is
NOTE: Enter a number in cells requesting a value; enter either a number or a form

(a)

Total Materials Variance:

(
(

AP
Value
?

)
)
=

minus
(
minus
(
Value

SQ
Value

X
X

Materials price variance:

(
AQ
X
AP
(
Value
X
Value
=
?
minus
?

)
)
=

minus
(
minus
(
Value

AQ
Value

X
X

Materials quantity variance:

(
AQ
X
SP
(
Value
X
Value
=
?
minus
?

)
)
=

minus
(
minus
(
Value

SQ
Value

X
X

Total Materials Variance:

(
AQ
X
AP
(
Value
X
Value
=
?
minus
?

)
)
=

minus
(
minus
(
Value

SQ
Value

X
X

Materials price variance:

(
AQ
X
AP
(
Value
X
Value
=
?
minus
?

)
)
=

minus
(
minus
(
Value

AQ
Value

X
X

(b)

AQ
Value
?

X
X
minus

Materials quantity variance:

(
(
=

AQ
Value
?

X
X
minus

SP
Value
?

)
)
=

minus
(
minus
(
Value

SQ
Value

X
X

After you have completed the requirements of E25-5, consider this additional question.
Assume the purchase price of direct materials changed to $4.80 and the quantity purc
1.
and used also changed to 30,000 units. Recalculate total materials variance and pric
quantity variances.

udes three units of direct materials at

rchased at a cost of $4.70 per unit, and
Product B.

ty variances.
tity purchased and used is 28,000 units
her a number or a formula in cells with a "?" .

SP
Value

)
)

SP
Value

)
)

SP
Value

)
)

SP
Value

)
)

SP
Value

)
)

SP
Value

)
)

additional question.
$4.80 and the quantity purchased
materials variance and price and

E25-7 Compute materials and labor variances

Nona Inc. which produces a single product, has prepared the following standard cost sheet
for one unit of the product.
Direct materials (8 pounds at $2.50 per pound)
Direct labor (3 hours at $12 per hour)

$20
$36

During the month of April, the company manufactures 235 units and incurs the following
actual costs.
Direct materials purchased and used (1,900 pounds)
$5,035
Direct labor (700 hours)
$8,260

Instructions
Compute the total, price, and quantity variances for labor and materials.
NOTE: Enter a number in cells requesting a value; enter either a number or a form

(a)

(b)

Total Materials Variance:

(
AQ
X
AP
(
Value
X
Value
=
?
minus
?

)
)
=

minus
minus
Value

(
(

SQ
Value

Materials price variance:

(
AQ
X
AP
(
Value
X
Value
=
?
minus
?

)
)
=

minus
minus
Value

(
(

AQ
Value

Materials quantity variance:

(
AQ
X
SP
(
Value
X
Value
=
?
minus
?

)
)
=

minus
minus
Value

(
(

SQ
Value

Total Labor Variance:

(
AH
X
(
Value
X
=
?
minus

)
)
=

minus
minus
Value

(
(

SH
Value

Labor Price variance:

AR
Value
?

(
(
=

AH
Value
?

X
X
minus

AR
Value
?

)
)
=

minus
minus
Value

(
(

AH
Value

Labor quantity variance:

(
AH
X
SR
(
Value
X
Value
=
?
minus
?

)
)
=

minus
minus
Value

(
(

SH
Value

After you have completed the requirements of E25-7, consider this additional question.
Assume that the actual quantity and price paid for direct material and labor
1.
changed to the following:
Direct materials purchased and used (2,000 pounds)
Direct labor (720 hours)
Recalculate total variance, price and quantity variances for both direct materials
and labor.

g standard cost sheet

incurs the following

er a number or a formula in cells with a "?" .

X
X

SP)
Value

)
)

X
X

SP
Value

)
)

X
X

SP
Value

)
)

X
X

SR
Value

)
)

X
X

SR
Value

)
)

X
X

SR
Value

)
)

dditional question.
material and labor
$6,200
$8,820

r both direct materials

P25-2A Compute variances, and prepare income statement

Ayala Corporation accumulates the following data relative to jobs started and finished during
Cost and Production Data
Raw materials unit cost
Raw materials units used
Direct labor payroll
Direct labor hours worked
Manufacturing overhead incurred
Manufacturing overhead applied
Machine hours expected to be used at normal capacity
Budgeted fixed overhead for June
Variable overhead rate per machine hour
Fixed overhead rate per machine hour

Actual
$2.25
10,600
$120,960
14,400
$189,500

Overhead is applied on the basis of standard machine hours. Three hours of machine time ar
required for each direct labor hour. The jobs were sold for $400,000. Selling and administrati
expenses were $40,000. Assume that the amount of raw materials purchased equaled the am
used.

Instructions
(a) Compute all of the variances for (1) direct materials and (2) direct labor.
(b) Compute the total overhead variance.
(c) Prepare an income statement for management. (Ignore income taxes.)
NOTE: Enter a number in cells requesting a value; enter either a number or a form

(a)(1)

Total Materials Variance:

(
AQ
X
(
Value
X
=
?
minus

AP
Value
?

)
)
=

minus
minus
Value

(
(

Materials price variance:

(
AQ
X
(
Value
X
=
?
minus

AP
Value
?

)
)
=

minus
minus
Value

(
(

Materials quantity variance:

(
AQ
X
(
Value
X

SP
Value

)
)

minus
minus

(
(

(a)(2)

(b)

(c )

minus

Value

Total Labor Variance:

(
AH
X
(
Value
X
=
?
minus

AR
Value
?

)
)
=

minus
minus
Value

(
(

Labor Price variance:

(
AH
X
(
Value
X
=
?
minus

AR
Value
?

)
)
=

minus
minus
Value

(
(

Labor quantity variance:

(
AH
X
(
Value
X
=
?
minus

SR
Value
?

)
)
=

minus
minus
Value

(
(

Value

Total Overhead Variance:

=

Actual
Overhead

minus

Value

minus

Overhead
Applied
Value

AYALA CORPORATION
Income Statement
For the Month Ended June 30, 2014
Sales revenue
Cost of goods sold (at standard)
Gross profit (at standard)
Variances
Material price
Materials quantity
Labor price
Labor quantity
Overhead
Total variance - favorable
Gross profit (actual)

Value
Value
Value
Value
Value

Selling and administrative expenses

Net income

After you have completed the requirements of P25-2A, consider this additional question.
1.
Assume that the actual price for raw materials changed to $2.30 and actual quantity o
Recompute total materials variance and price and quantity variances for materials.
2.
Show the impact of the changes above on the income statement.

ted and finished during the month of June 2014.

Standard
$2.10
10,000
$120,000
15,000
$193,500
42,500
$55,250
$3.00
$1.30

ours of machine time are

Selling and administrative
urchased equaled the amount

r a number or a formula in cells with a "?" .

SQ
Value

X
X

SP)
Value

)
)

AQ
Value

X
X

SP
Value

)
)

SQ
Value

X
X

SP
Value

)
)

SH
Value

X
X

SR
Value

)
)

AH
Value

X
X

SR
Value

)
)

SH
Value

X
X

SR
Value

)
)

Value
Value
Value

Value
Value

Value
Value

dditional question.
30 and actual quantity of raw materials used changed to 11,000 units.
riances for materials.

P25-6A Journalize and post standard cost entries, and prepare income statement
Jorgenson Corporation uses standard costs with its job order cost accounting system.
In january, an order (Job No. 12) for 1,900 units of Product B was received. The standard
cost of one unit of Product B is as follows.
Direct materials
Direct labor
Overhead

3 pounds at $1.00 per pound

1 hour at $8.00 per hour
2 hours (variable $4.00 per machine hour;
fixed $2.25 per machine hour)
Standard cost per unit
Normal capacity for the month was 4,200 machine hours. During January, the following
transactions applicable to Job No. 12 occurred.
1. Purchased 6,200 pounds of raw materials on account at $1.05 per pound.
2. Requisitioned 6,200 pounds of raw materials for Job No. 12.
3. Incurred 2,000 hours of direct labor at a rate of $7.80 per hour.
4. Worked 2,000 hours of direct labor on Job No.12.
5. Incurred manufacturing overhead on account $25,000.
6. Applied overhead to Job No. 12 on basis of standard machine hour allowed.
7. Completed Job No. 12.
8. Billed customer for Job No. 12 at a selling price of $65,000.

Instructions
(a) Journalize the transactions.
(b) Post to the job order cost accounts.
(c ) Prepare the entry to recognize the total overhead variance.
(d) Prepare the January 2014 income statement for management. Assume selling and
administrative expenses were $2,000.
NOTE: Enter a number in cells requesting a value; enter either a number or a form

g system.
he standard

$3.00
8.00
12.50
$23.50

he following

selling and

umber or a formula in cells with a "?" .

P25-2B Compute variances, and prepare income statement

Huang Company uses a standard cost accounting system to account for the manufacture of exhaust fa
In July 2014, its accumulates the following data relative to 1,800 units started and finished.
Cost and Production Data
Raw materials
Units purchased
Units used
Unit cost
Direct labor
Hours worked
Hourly rate
Manufacturing overhead
Incurred
Applied

Actual

Standard

21,000
$21,000
$3.70

$22,000
$3.50

3,450
$11.50

$3,600
$12.00

$94,800
$100,800

Manufacturing overhead was applied on the basis of direct labor hours. Normal capacity for the mont
direct labor hours. At normal capacity, budgeted overhead costs were $16 per labor hour variable and
hour fixed. Total budgeted fixed overhead costs were $40,800.
Jobs finished during the month were sold for $270,000. Selling and administrative expenses were $
Instructions
(a) Compute all of the variances for (1) direct materials and (2) direct labor.
(b) Compute the total overhead variance.
(c) Prepare an income statement for management. (Ignore income taxes.)

NOTE: Enter a number in cells requesting a value; enter either a number or a form

(a)(1)

Total Materials Variance:

(
AQ
X
AP
(
Value
X
Value
=
?
minus
?

)
)
=

minus
(
minus
(
Value

SQ
Value

Materials price variance:

(
AQ
X
AP
(
Value
X
Value
=
?
minus
?

)
)
=

minus
(
minus
(
Value

AQ
Value

Materials quantity variance:

(
AQ
X
SP
(
Value
X
Value

)
)

minus
minus

SQ
Value

(
(

(a)(2)

(b)

Value

Total Labor Variance:

(
AH
X
(
Value
X
=
?
minus

AR
Value
?

)
)
=

minus
(
minus
(
Value

SH
Value

Labor Price variance:

(
AH
X
(
Value
X
=
?
minus

AR
Value
?

)
)
=

minus
(
minus
(
Value

AH
Value

Labor quantity variance:

(
AH
X
SR
(
Value
X
Value
=
?
minus
?

)
)
=

minus
(
minus
(
Value

SH
Value

minus

Value

Total Overhead Variance:

=

(c )

Actual
minus
Overhead
Value

minus

Overhead
Applied
Value

HUANG COMPANY
Income Statement
For the Month Ended July 31, 2014
Sales revenue
Cost of goods sold (at standard)
Gross profit (at standard)
Variances
Material price
Materials quantity
Labor price
Labor quantity
Overhead
Total variance - favorable
Gross profit (actual)

Value
Value
Value
Value
Value
Value
Value
Value
Value
Value

Selling and administrative expenses

Net income

Value
Value

After you have completed the requirements of P25-2B, consider these additional questions.
1.
Assume that the actual quantity and rate for labor changed to 3,600 hours and $11
Recompute total labor variance and price and quantity variances for labor.
2.
Show the impact of the changes above on the income statement.

anufacture of exhaust fans.

and finished.

l capacity for the month was 3,400

labor hour variable and $12 per labor

rative expenses were $20,000.

a number or a formula in cells with a "?" .

X
X

SP)
Value

)
)

X
X

SP
Value

)
)

X
X

SP
Value

)
)

X
X

SR
Value

)
)

X
X

SR
Value

)
)

X
X

SR
Value

)
)

dditional questions.
3,600 hours and $11.75 per hour.
ces for labor.

P25-6B Journalize and post standard cost entries, and prepare income statement
Frio Company uses standard costs with its job order cost accounting system.
In January, an order (Job No. 84) was received for 5,500 units of Product D . The standard
cost of one unit of Product D is as follows.
Direct materials
Direct labor
Overhead
Standard cost per unit

1.5 pounds at $4.00 per pound

1 hour at $9.00 per hour
1 hour (variable $7.40; fixed $8.00

Overhead is applied on the basis of direct labor hours. Normal capacity for the month
of January was 6,000 direct labor hours. During January, the following transactions
applicable to Job No, 48 occurred.
1. Purchased 8,100 pounds of raw materials on account at $3.70 per pound.
2. Requisitioned 8,100 pounds of raw materials for production.
3. Incurred 5,200 hours of direct labor at a rate of $9.20 per hour.
4. Worked 5,200 hours of direct labor on Job No.84.
5. Incurred $87,500 of manufacturing overhead on account.
6. Applied overhead to Job No. 84 on basis of direct labor hours.
7. Transferred Job NO. 84 to finished goods.
8. Billed customer for Job No. 84 at a selling price of $270,000.

Instructions
(a) Journalize the transactions.
(b) Post to the job order cost accounts.
(c ) Prepare the entry to recognize the total overhead variance.
(d) Prepare the January 2014 income statement for management. Assume selling and
administrative expenses were $60,000.
NOTE: Enter a number in cells requesting a value; enter either a number or a form

(a)(1)

Account
Account
Account

(a)(2)

Account
Account
Account

(a)(3)

Account

Account
Account

(a)(4)

Account
Account
Account

(a)(5)

Account
Account

(a)(6)

Account
Account

(a)(7)

Account
Account

(a)(8)

Account
Account

Account
Account

(b)
Value

Raw Materials Inventory

Value

Value

Factory Labor
Value

Materials Price Variance

Materials Quantity Varianc

Value

Manufacturing Overhead
Value

Labor Price Variance

Value

Labor Quantity Variance

(c )

Account
Account

(d)

FRIO COMPANY
Income Statement
For the Month Ended January 31, 2014
Sales revenue
Cost of goods sold (at standard)
Gross profit (at standard)
Variances
Material price
Materials quantity
Labor price
Labor quantity
Overhead
Total variance - favorable
Gross profit (actual)
Selling and administrative expenses
Net income

Value
Value
Value
Value
Value

After you have completed the requirements of P25-6B, consider this additional question.
1.

Assume that the actual purchase priceof direct material changed to $3.90 per pound and
actual direct labor rate changed to $9.50 per hour. Revise the journal entries as approoriat
and show changes on the job cost T-accounts.

statement

t D . The standard

0 per pound

$6.00
9.00
15.40
$30.40

7.40; fixed $8.00

y for the month

ransactions

ume selling and

a number or a formula in cells with a "?" .

Value
Value
Value

Value
Value
Value

Value

Value
Value

Value
Value
Value

Value
Value

Value
Value

Value
Value

Value
Value

Value

aterials Price Variance

Value

erials Quantity Variance

Value

Value

Work in Process Inventory

Value
Value
Value
Value

Value

Finished Goods Inventory

Value

Labor Price Variance

Cost of Goods Sold

Value

abor Quantity Variance

Value

Value
Value

014
Value
Value
Value

Value
Value
Value
Value

ditional question.

o $3.90 per pound and

nal entries as approoriate