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E11-2 E11-4 E11-14 E11-16 P11-1A P11-4A

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ACC560 CHAPTER 12

E11-2 Hank Itzek manufactures and sells homemade wine, and he wants to develop a
standard cost per gallon. The following are required for production of a 50-gallon batch.


3,000 ounces of grape concentrate at $0.06 per ounce
54 pounds of granulated sugar at $0.30 per pound
60 lemons at $0.60 each
50 yeast tablets at $0.25 each
50 nutrient tablets at $0.20 each
2,600 ounces of water at $0.005 per ounce

Hank estimates that 4% of the grape concentrate is wasted, 10% of the sugar is lost, and
25% of the lemons cannot be used.

Instructions
Compute the standard cost of the ingredients for one gallon of wine. (Carry computations
to two decimal places.)

E11-4 Monte Services, Inc. is trying to establish the standard labor cost of a typical oil
change. The following data have been collected from time and motion studies conducted
over the past month.
Actual time spent on the oil change  1.0 hour 
Hourly wage rate  $12
Payroll taxes  10% of wage rate 
Setup and downtime  20% of actual labor time 
Cleanup and rest periods  30% of actual labor time 
Fringe benefits  25% of wage rate 

Instructions
(a) Determine the standard direct labor hours per oil change.
(b) Determine the standard direct labor hourly rate.
(c) Determine the standard direct labor cost per oil change.
(d) If an oil change took 1.6 hours at the standard hourly rate, what was the direct labor
quantity variance?

E11-14 Picard Landscaping plants grass seed as the basic landscaping for business campuses.
During a recent month, the company worked on three projects (Remington, Chang,
and Wyco). The company is interested in controlling the materials costs, namely the grass
seed, for these plantings projects.

In order to provide management with useful cost control information, the company
uses standard costs and prepares monthly variance reports. Analysis reveals that the purchasing
agent mistakenly purchased poor-quality seed for the Remington project. The
Chang project, however, received higher-than-standard-quality seed that was on sale. The
Wyco project received standard-quality seed. However, the price had increased and a new
employee was used to spread the seed.
Shown below are quantity and cost data for each project.



Instructions
(a) Prepare a variance report for the purchasing department with the following columns:
(1) Project, (2) Actual Pounds Purchased, (3) Actual Price, (4) Standard Price, (5) Price
Variance, and (6) Explanation.
(b) Prepare a variance report for the production department with the following columns:
(1) Project, (2) Actual Pounds, (3) Standard Pounds, (4) Standard Price, (5) Quantity
Variance, and (6) Explanation.

E11-16 Fisk Company uses a standard cost accounting system. During January, the company
reported the following manufacturing variances.

In addition, 8,000 units of product were sold at $8 per unit. Each unit sold had a standard
cost of $5. Selling and administrative expenses were $8,000 for the month.

Instructions
Prepare an income statement for management for the month ended January 31, 2014.

P11-1A Costello Corporation manufactures a single product. The standard cost per unit
of product is shown below.

Direct materials - 1 pound plastic at $7.00 per pound   7.00
Direct labor - 1.6 hours at $12.00 per hour   19.20
Variable manufacturing overhead   12.00
Fixed manufacturing overhead   4.00
Total standard cost per unit   42.20

The predetermined manufacturing overhead rate is $10 per direct labor hour ($16.00 4
1.6). It was computed from a master manufacturing overhead budget based on normal
production of 8,000 direct labor hours (5,000 units) for the month. The master budget
showed total variable costs of $60,000 ($7.50 per hour) and total fixed overhead costs
of $20,000 ($2.50 per hour). Actual costs for October in producing 4,900 units were as
follows.

Direct materials (5,100 pounds)   36,720
Direct labor (7,500 hours)   93,750
Variable overhead   59,700
Fixed overhead   21,000
Total manufacturing costs   211,170

The purchasing department buys the quantities of raw materials that are expected to be
used in production each month. Raw materials inventories, therefore, can be ignored.

Instructions
(a) Compute all of the materials and labor variances.
(b) Compute the total overhead variance.

P11-4A Kansas Company uses a standard cost accounting system. In 2014, the company
produced 28,000 units. Each unit took several pounds of direct materials and 1.6 standard
hours of direct labor at a standard hourly rate of $12.00. Normal capacity was 50,000
direct labor hours. During the year, 117,000 pounds of raw materials were purchased at
$0.92 per pound. All materials purchased were used during the year.

Instructions
(a) If the materials price variance was $3,510 favorable, what was the standard materials
price per pound?
(b) If the materials quantity variance was $4,750 unfavorable, what was the standard
materials quantity per unit?
(c) What were the standard hours allowed for the units produced?
(d) If the labor quantity variance was $7,200 unfavorable, what were the actual direct
labor hours worked?
(e) If the labor price variance was $9,080 favorable, what was the actual rate per hour?
(f) If total budgeted manufacturing overhead was $360,000 at normal capacity, what was
the predetermined overhead rate?
(g) What was the standard cost per unit of product?
(h) How much overhead was applied to production during the year?
(i) Using one or more answers above, what were the total costs assigned to work in
process?

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