The Jubilee Corporation manufactures a product with the following standard costs:

Direct materials - 20 yards at Pl.35 per yard.......... ..................... ............ P 27

Direct labor - 4 hours at P9 per hour......................................... ...... ......... 36

Factory overhead - 4 direct labor hours at P7.S0 per hour;

ratio of variable to fixed factory overhead is 2:1.................................. 30

Total standard cost per unit of output............... . .. .................................. .. e...93

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Standards are based on normal monthly capacity of 2,400 direct labor hours. The following information
pertains

to July:

Units produced in July..... ......... .. ............. ...................................... ............. 500

Direct materials purchased - 18,000 yards at Pl.38 per yard ................... P 24,840

Direct materials used - 9,500 yards

Direct labor - 2,100 hours at P9.l5 per hour................ .. .. .................. ....... 19,215

Actual factory overhead.................... ... ............. .............. .. ................. ......... 16,650

Required:

1. Compute the following variances and indicated whether they are favorable or unfavorable:

a. Materials purchase price, price usage, and quantity variances.

b. Labor rate and efficiency variances.

c. Factory overhead controllable and volume variances. Show the computation of variable and

fixed factory overhead per direct labor hour and the total budgeted factory overhead into

variable and fixed.

2. Prepare the entries for Number 1 above.

(AICPA Adapted)

II - Process Costing and Standard Cost Variance Analysis (With Solution)

The Cross Company uses a standard process costing system - FIFO method in its one production
department.

Material A is added at the beginning of the process, and Material B is added when the units are 90%
complete.
Inspection take place at the end of the process, and all spoilage is expected to be abnormal. The
standard cost of

abnormal spoilage is charged to a current period expense account. Normal capacity is 7,800 labor hours
per

month.

The standard cost per unit is as follows:

Material A: 4 gallons at Pl.20 ........ ·...... .. .... ..... ..................................... P 4.80

Material B; 2 square feet at P.70.......... .................................................. 1.40

Direct labor: 1 hour at Pll.50...... ................... .. ..................... .............. .. 11.50

Variable factory overhead: 1 hour at Pl.80.. ... ... .......................... ... ..... 1.80

Fixed factory overhead: 1 hour at PS.OD . ... .. :........................................ 5.00

Total. ...... ................................................ ........ .......................... .... ... . P.21,.5.Q

Additional data for January are as follows:

a. Beginning work in process inventory: 3.000 units (33 1/3% converted)

b. Started in process during the month, 11.,ooo units.

c. Finished during January, 8,000 units.

d. Ending work in process inventory, 5,000 units (40% converted)

e. Actual costs incurred are as follows:

Material A used................ ..... ..................... ..... . . . 50,000 gallons at Pl.00

Material Bused. ,................... ................... .. ........ 18,000 sq. ft. at P.75

Direct labor................. .. .... . ... . ..... .. .. . .. ... .... ..... .. 10,200 hours at Pl2.00

Factory overhead .... ......... ............ ...... ...... ........... P60,100

Required: .

1. Compute the January equivalent production for Material A, Material B, and for conversion costs.

2. Compute the materials price usage and quantity variances for each kind of material, the labor rate

and labor efficiency variances, and the factory overhead controllable and volume variances. Indicate

whether the variances are favorable or unfavorable.