The Income Summary account has a debit balance of 10,000 prior to ...

[DyllonKazuo]

The Income Summary account has a debit balance of 10,000 prior to closing. The owner's Drawing account has a balance of 7,000 before closing. The owner's Capital account will
 a. decrease 10,000.
   b. increase 17,000.
   c. increase 10,000.
   d. decrease 17,000.
   e. increase 7,000.

Question 2

Direct materials and manufacturing labor variances, solving unknowns.
 
  (CPA, adapted) On May 1, 2014, Lowell Company began the manufacture of a new paging machine known as Dandy. The company installed a standard costing system to account for manufacturing costs. The standard costs for a unit of Dandy follow:
 
  The following data were obtained from Lowell's records for the month of May:
 
   Actual production in May was 4,700 units of Dandy, and actual sales in May were 3,000 units.
  The amount shown for direct materials price variance applies to materials purchased during May.
  There was no beginning inventory of materials on May 1, 2014.
 
  Compute each of the following items for Lowell for the month of May. Show your computations.
 
  Required:
  1. Standard direct manufacturing labor-hours allowed for actual output produced
  2. Actual direct manufacturing labor-hours worked
  3. Actual direct manufacturing labor wage rate
  4. Standard quantity of direct materials allowed (in pounds)
  5. Actual quantity of direct materials used (in pounds)
  6. Actual quantity of direct materials purchased (in pounds)
  7. Actual direct materials price per pound

[dlook33]

Answer to Question 1

d

Answer to Question 2

All given items are designated by an asterisk.

Actual Costs
Incurred
(Actual Input Qty.
 Actual Price)

(2,350  15.87)
37,300

Actual Input Qty.
 Budgeted Price Flexible Budget
(Budgeted Input
Qty. Allowed for
Actual Output
 Budgeted Price)
Direct
Manufacturing
Labor
(2,350  16)
35,600
(4,700  0.5  16)
37,600

1,700 U 2,000 F
Price variance Efficiency variance

Purchases Usage
Direct (10,600  3.42) (10,600  3) (10,367  3) (4,700  2  3)
Materials 36,300 31,800 31,100 28,200

4,500 U 2,900 U
Price variance Efficiency variance

1. 4,700 units  0.5 hours/unit = 2,350 hours

2. Flexible budget  Efficiency variance = 37,600  2,000 = 35,600
Actual dir. manuf. labor hours = 35,600  Budgeted price of 16/hour = 2,225 hours

3. 35,600 + Price variance, 1,700 = 37,300, the actual direct manuf. labor cost
Actual rate = Actual cost  Actual hours = 37,300  2,225 hours = 17/hour (rounded)

4. Standard qty. of direct materials = 4,700 units  2 pounds/unit = 9,400 pounds

5. Flexible budget + Dir. matls. effcy. var. = 28,200 + 2,900 = 31,100
Actual quantity of dir. matls. used = 31,100  Budgeted price per lb
= 31,100  3/lb = 10,367 lbs

6. Actual cost of direct materials, 36,300  Price variance, 4,500 = 31,800
Actual qty. of direct materials purchased = 31,800  Budgeted price, 3/lb = 10,600 lbs.

7. Actual direct materials price = 36,300  10,600 lbs = 3.42 per lb.

[DyllonKazuo]

Correct answers!

[dlook33]

Great! Please up vote