Standard Products Company Recognizes Variances from Standards at the Earliest

question 99

Essay

Standard Products Company recognizes variances from standards at the earliest opportunity, and the quantity of direct materials purchased is equal to the quantity used. The following information is available for the most recent month. Assume the allocation base for fixed overhead costs is the number of units.
Direct Materials Direct Labor
Standard quantity/unit 6.00 lbs. 2.5 hrs.
Standard price/lb. or hr. $8.10/lb. $8.00/hr.
Actual quantity/unit 6.25 lbs. 2.8 hrs.
Actual price/lb. or hr. $8.00/lb. $7.50/hr
Price variance $562.50 F $1,260.00 F
Quantity/Efficiency variance $1,822.50 U $2,160.00 U
Static budget volume 800 units
Actual volume 900 units
Actual overhead cost $11,000
Standard variable overhead cost $5/unit
Standard fixed overhead cost $5,600
Overhead flexible budget variance $900 U
Production volume variance $700 F
Journalize the direct labor costs incurred and the assignment of direct labor to Work in Process Inventory, including the related variances.

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Definitions:

Estimated Product

A provisional evaluation or calculation of a product's potential production costs, sales value, or impact on the market.

Warranty Expense

Costs associated with the commitment to repair or replace a product if it fails within a specified period.

Warranty Repairs

Services offered to repair or replace products free of charge that have been sold with a guarantee promising repair if necessary within a certain period.

Income Statement

A financial document summarizing a company's revenues, expenses, and profits over a specific period, typically a quarter or year.