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Manufacturing Standard Cost Sheets

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Assignment (submit Excel file plus 12-15 slides presentation w/ speaker notes)

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One of your clients, Moore Manufacturing has asked you to assist them in evaluating their performance against their budgets. The management of Moore Manufacturing has provided the following standard cost sheet for one of its products:
1. Determine the following for the period:
a. Flexible budget for variable overhead based on output for the period
b. Total variable overhead applied to production during the period
c. Total budgeted fixed factory overhead
d. Total fixed factory overhead applied to production during the period
Calculate the following variances using four-variance analysis:
. Total variable overhead variance
a. Variable overhead spending variance
b. Variable overhead efficiency variance
c. Total under applied or over applied variable overhead
d. Fixed overhead spending variance
e. Production volume variance
f. Total fixed overhead variance
g. Total under applied or over applied fixed overhead
Calculate the following variances using three-variance analysis:
. Factory overhead spending variance
a. Factory overhead efficiency variance
b. Production volume variance
Calculate the total overhead flexible budget variance and the production volume variance using a two-variance analysis. (in excel file).

2. Prepare a 12-15 slides presentation for the management team at Moore Manufacturing explaining the variances and evaluating their performance. (ppt file)

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Solution Summary

The solution examines manufacturing standard cost sheets.

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Healing Touch manufactures massage chairs with the following standard cost structure:

Standard Cost Sheet: Massage Chair

Metal tubing 6 meters @ $3 $18.00
Leather 2 square meters @ $7 14.00
Padding 3 Kilograms @$4 12.00
Direct labor 4 hours @ $15 60.00

Total standard cost $104.00

During the moth 500 chairs are manufactured and the following cost incurred:

Actual Cost Incurred for the Month: Massage Chair

Metal tubing 3,100 meters $9,455
Leather 1,100 square meters 7,722
Padding 1,600 kilograms 6,560
Direct labor 1,800 hours 27,270

Total cost $51,007


a. Calculate all materials and labor variances (including price, quantity, wage rate, and labor efficiency variances).

b. Write a short report summarizing and analyzing the manufacturing operations for the month.

Howard Binding manufactures two types of notebooks: large and small. The large and small notebooks are made of the same cloth cover (direct materials) but in different quantities. The standard cost sheet for each follows.

Large Small
Cloth covering 3 feet @ $0.30/foot 2 feet @ $0.30/foot
Ring holder 1 @ $0.12 each 1 @ $0.12 each
Direct labor 800 hours @ $5.80/hour 780 hours @$6.10/ hour


a. Calculate the cloth covering price variance (i) at purchase and (ii) when the materials are actually used.

b. Discuss whythe two price variance calculate in (a) differ. Which is superior (and why)?

Software Associates (SA) is a computer software consulting firm that specializes in a designing and implementing intergrated marketing database warehousing programs. Humphrey Catalog is a client. In preparing its bid for Humphrey, SA estimates its total labor cost for this project to be $222,500, broken down as follows:

Budgeted Budgeted Budgeted
Hours Wage Cost
Partner 100 $175 $17,500
Associate 300 120 36,000
Senior analyst 600 90 54,000
Analyst 1,000 40 40,000
Programmer 3,000 25 75,000

Total $222,500

After the completion of the Humphrey contract, the following data are reported:

Actual Actual
Hours Cost

Partner 90 $15,750
Associate 280 35,000
Senior analyst 750 63,750
Analyst 1,400 49,000
Programmer 3,600 82,000

Total $246,300


a. Prepare a performance report for the Humphrey Catalog project.

b. Offer a plausible explanation for SA's performance on the Humphrey project.


Golf ball manufacturer Trevino is generally

A recent trend in the golf ball industry is the movement toward a 15-ball dozen (a so-called value pack). This value-oriented offering provides the consumer with 15 golf balls for the price of a standard (12-ball) dozen. Using one of its less popular, lower-quality golf ball brands, Trevino entered this market in a temporary, special promotion context. The entry was primarily in response to competitive pressures from smaller, lower-quality ball manufactures who were flooding the market with value packs.

Initially, Trevino encountered several start-up problems relating to the unorthodox 15-ball packaging. Since the packaging machinery had been tooled to accommodate 12-ball-dozens, it could not be converted to run packaging for 15-ball dozens. These 15-ball value packs had to be packed by hand. Nonetheless, as the market developed, the value pack became a permanent product offering, Trevino continued to offer its higher quality , more popular brands exclusively in a 12-ball dozen configuration.

Trevino uses a standard cost system based on cost per 12-ball unit. When the value pack was introduced, it was costed at the 12-ball standard. As a result, the standard cost for the value pack includes only the cost associated with the manufacturing of 12 balls. The cost of the remaining three balls is written off to a value-pack sales promotion account when the balls are manufactured and is treated as a marketing expense for that period. Trevino calculates this written-off amount by taking the standard cost per golf ball (12-ball standard divided by 12) and multiplying it by three.

The table shows Trevino's most recent business plan, displays how the standard cost of value pack did not increase to account for the additional three balls.

Trade Standard Gross Gross
Product Units List Price Manf Cost Margin $ margin %

Standard dozen 2 million $17.00 $6.75 $10.25 60.3%
(12 balls)
Value pack 1 million 17.00 6.75 10.25 60.3
(15 balls)


a. What effect is the accounting treatment of the value pack having on Trevino?

b. Why do you think the company implemented such an accounting treatment

c. Should the accounting treatment of the value pack to be changed?

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