(Appendix 10B)Vernon Mills,Inc

question 71

Essay

(Appendix 10B)Vernon Mills,Inc.is a large producer of men's and women's clothing.The company uses standard costs for all of its products.The standard costs and actual costs per unit of product for a recent period are given below for one of the company's product lines:

During this period, the company produced 4,800 units of this product. A comparison of standard and actual costs for the period on a total cost basis is given below:

There was no inventory of materials on hand at the beginning of the period. During the period, 21,120 metres of materials were purchased, all of which were used in production.

Required:

a) (Appendix 10B) For direct materials, compute the price and quantity variances for the period and prepare journal entries to record all activity relating to direct materials for the period.
b) (Appendix 10B) For direct labour, compute the rate and efficiency variances and prepare a journal entry to record the incurrence of direct labour cost for the period.
c) For variable overhead, compute the spending and efficiency variances.

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Definitions:

Physical Substance

The tangible aspect of assets, implying that they have a real, palpable presence.

Return On Assets

ROA, also known as Return on Assets, quantifies the efficiency with which a company uses its assets to generate net income, serving as an indicator of managerial effectiveness.

Total Assets

The sum of all resources owned by a company, valued in monetary terms.

Return on Assets

A profitability ratio that indicates how efficiently a company uses its assets to generate profit, calculated by dividing net income by total assets.