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# Compute both the direct materials price variance, quantity variance, direct labor rate variance, and efficiency variance for the year.

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Standard Cost Card -- Per Unit
Direct materials, 4 yards at \$3.50 per yard . . . . . . . . . . . . . . . . . . . . . . . . \$14
Direct labor, 1.5 direct labor-hours at \$12 per direct labor-hour . . . . . . . . . 18
Variable overhead, 1.5 direct labor-hours at \$2 per direct labor-hour . . . . . 3
Fixed overhead, 1.5 direct labor-hours at \$6 per di-rect labor-hour . . . . . . . 9
Standard cost per unit . . . . . . . . . . . . . . . . . . . . . . \$44

The following additional information is available for the year just completed:

a.Company manufactured 20,000 units of product during the year;
b.A total of 80,000 yards of material were purchased during the year at a cost of \$3.75 per yard. 78,000 yards of this material were used to manufacture the 20,000 units. Company determines the direct materials purchase price variance at the time of acquisition.
a.Direct laborers worked 32,500 hours during the year at an average compensation of \$11.80 per hour.
b. Overhead cost is applied to the product on the basis of direct-labor hours. Data relating to manufactur-ing overhead costs follow:

Denominator activity level (direct labor-hours) . . . . . . . . . . . . . . 25,000
Budgeted fixed overhead costs (from the flexible budget) . . . . . \$150,000
Actual fixed overhead costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$148,000
Actual variable overhead costs . . . . . . . . . . . . . . . . . . . . . . . . . \$68,250

1.Compute both the direct materials price variance and quantity variance for the year;
2.Compute both the direct labor rate variance and efficiency variance for the year;
3.Compute both the variable overhead spending variance and efficiency variance for the year;
4.Compute the fixed overhead budget (spending) variance and volume variance for the year.

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## Comprehensive Variance Analysis with Incomplete Data; Journal Entries

FAR NORTH SPORTING, LTD.

CHECK FIGURE
(1a) Materials price variance: \$12,400 F
(3) Variable overhead spending variance: \$4,080 F

Far North Sporting, Ltd., manufactures a premium hockey stick. The standard cost of one hockey stick is:

Std. Qty or Hrs Std. Price or Rate Std. Cost
Direct materials ?feet \$5.00/foot \$?
Direct labor 1.5 hrs ?/hour ?
Variable manufacturing overhead ?hours \$2.50/hr ?
Total standard cost \$45.75

Last year, 12,000 hockey sticks were produced and sold. Selected cost data relating to last year's operations follow:

Dr. Cr.
Accounts payable-direct materials purchased (62,000 ft) \$297,600
Wages payable (? hours) \$236,640*
Work in process-direct materials \$288,000
Direct labor rate variance \$8,160

*Relates to the actual direct labor cost for the year.

The following additional information is available for last year's operations:
a. No materials were on hand at the start of last year. Some of the materials purchased during the year were still on hand in the warehouse at the end of the year.
b. The variable manufacturing overhead rate is based on direct labor-hours. Total actual variable manufacturing overhead cost for last year was \$46,920.
c. Actual direct materials usage for last year exceeded the standard by 0.2 feet per stick.

Required:

1. For direct materials:
a. Compute the price and quantity variances for last year.
b. Prepare journal entries to record all activities relating to direct materials for last year.
2. For direct labor:
a. Verify the rate variance given above and compute the efficiency variance for last year.
b. Prepare a journal entry to record activity relating to direct labor for last year.
3. Compute the variable overhead spending variance for last year and verify the variable overhead efficiency variance given above.
4. State possible causes of each variance that you have computed.
5. Prepare a standard cost card for one hockey stick.

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