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Fundamentals of Cost Accounting (XYZ Case Study)

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The XYZ Company uses a standard cost accounting system and estimates production for 2007 to be 60,000 units. At this volume, the company's variable overhead costs are $.50 per direct labor hour.

The company's single product has a standard cost of $30.00 per unit. Included in the $30.00 is $13.20 for direct materials (3 yards) and $12.00 of direct labor (2 hours). Production information for the month of March 2007 follows:

Number of units produced 6,000
Materials purchased 24,000 yards $115,200
Materials used in production (yards) 18,500
Variable overhead costs incurred $6,380
Fixed overhead costs incurred $20,400
Direct labor cost incurred $6.50 hour. $75,400

Required: (Be sure to indicate whether the variances are favorable or unfavorable.)
a Prepare the standard cost sheet for the company.
b Compute the direct material price variance, assuming the material price variance is the responsibility of the company's purchasing agent.
c Prepare the journal entry to record the purchase of direct materials.
d Compute the direct labor efficiency variance.
e Compute the budgeted fixed overhead costs for the month and for the year.
f Compute the fixed overhead volume variance.

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Solution Summary

The fundamentals of cost accounting for XYZ Case Study is examined.