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End-Of-Chapter Exercises - Standard Costing and Variances

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End-Of-Chapter Exercises - Standard Costing and Variances

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dhieu7778
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© © All Rights Reserved
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Exercise 1 (Standard Cost of Goods Manufactured): South Atlantic Che m ical Company

manufactures industrial chemicals in Rio de Janeiro, Brazil. The company plans to introduce a
new chemical solution and needs to develop a standard product cost. The new chemical solution
is made by combining a chemical compound (nyclyn) and a solution (salex), heating the mixture,
adding a second compound (protet), and bottling the resulting solution in 10-liter containers. The
initial mix, which is 11 liters in volume, consists of 12 kilograms of nyclyn and 9.6 liters of
salex. A 1-liter reduction in volume occurs during the boiling process. The solution is cooled
slightly before 5 kilograms of protet are added. The addition of protet does not affect the total
liquid volume. The purchase price of the direct materials used in the manufacture of this new
chemical solution are given below:
Nyclyn : $4.35 per kilogram
Salex: $5.40 per liter
Protet: $7.20 per kilogram
Required: Determine the standard material cost of a 10-liter container of the new product.

Exercise 2 (Direct Cost Variances): During April, Dryden Company’s material purchases
amounted to 6,500 pounds at a price of $7.40 per pound. Actual costs incurred in the production
of 2,000 units were as follows:
Direct labor: $118,035 ($18.30 per hour)
Direct material: $31,820 ($7.40 per pound)
The standards for one unit of Dryden Company’s product are as follows:
Direct labor: Direct material:
Quantity: 3 hours per unit Quantity: 2 pounds per unit
Rate: $18.00 per hour Price: $7.20 per pound
Required: Compute the direct-material price and quantity variances, and the direct-labor rate and
efficiency variances. Indicate whether each variance is favorable or unfavorable.

Exercise 3 (Overheads Variances): The following data are the actual results for Marvelous
Marshmallow Company for August:
Actual output 13,500 cases
Actual variable overhead $607,500
Actual fixed overhead $183,000
Actual machine time 60,750 machine hours

Standard cost and budget information for Marvelous Marshmallow Company follows:
Standard variable-overhead rate $9.00 per machine hour
Standard quantity of machine hours 4 hours per case of marshmallows
Budgeted fixed overhead $180,000 per month
Budgeted output 15,000 cases per month
Required: Use any of the methods explained in the chapter to compute the following variances.
Indicate whether each variance is favorable or adverse, where appropriate.
1. Variable-overhead spending variance.
2. Variable-overhead efficiency variance.
3. Fixed-overhead budget variance.
4. Fixed-overhead volume variance.

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