Maple Leaf Production manufactures truck tires. The following information is ava
ID: 2559964 • Letter: M
Question
Maple Leaf Production manufactures truck tires. The following information is available for the last operating period.
Maple Leaf produced and sold 92,000 tires for $40 each. Budgeted production was 100,000 tires.
Standard variable costs per tire follow:
Fixed production overhead costs:
Monthly budget $1,350,000
Fixed overhead is applied at the rate of $15 per tire.
Actual production costs:
Required:
a. Prepare a cost variance analysis for each variable cost for Maple Leaf Productions. (Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
b. Prepare a fixed overhead cost variance analysis. (Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
c. (Appendix) Prepare the journal entries to record the activity for the last period using standard costing. Assume that all variances are closed to cost of goods sold at the end of the operating period. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Direct materials: 4 pounds at $2 $ 8.00 Direct labor: 0.4 hours at $18 7.20 Variable production overhead: 0.18 machine-hours at $10 per hour 1.80 Total variable costs $ 17.00Explanation / Answer
Budget
Direct Materials :4 pounds at $2= 8
Direct labour: 0.4 hours at $18 = 7.20
Variable production overhead = 0.18 machine hours at $10= 1.8
Total variable cost= 17
Fixed production overhead costs =1350000
Actual:
Direct Materials : 384000 pounds at 1.8= 691200
Direct labour : 35200 hours at 18.40= 647680
Variable production overhead :17280 machine hours at 10.20 per hour =176256
a Cost Variance Analysis :-
Material Variance=(Standard quantity for actual out *standard rate) - (Actual quantity *actual rate)
=(92000*8)-(384000*1.8)=
736000-691200=44800 F
Total direct labour variance=
(standard hours *standard rate) - (Actual hours *actual rate)
=(92000*7.2)-647680
=662400-647680=14720F
Variable overhead budget variance
Variance= Budgeted cost-Actual cost
= (92000*1.8)-176256=10656A
b Fixed Overhead Cost Variance
=Budgeted Cost - Actual Cost
=(92000*15)-1360000= 20000F