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Muniba Variance Analysis and Standard Costing All Numrucals With Solution

The document outlines various accounting problems related to standard cost systems in different companies, including Svenska Pharmicia, Harmon Household Products, and Topper Toys. It involves calculations for purchase prices, cost variances, and manufacturing efficiencies based on given production data. Each section requires specific computations and explanations related to materials and labor costs for the respective products.

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fahad akbar
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6 views26 pages

Muniba Variance Analysis and Standard Costing All Numrucals With Solution

The document outlines various accounting problems related to standard cost systems in different companies, including Svenska Pharmicia, Harmon Household Products, and Topper Toys. It involves calculations for purchase prices, cost variances, and manufacturing efficiencies based on given production data. Each section requires specific computations and explanations related to materials and labor costs for the respective products.

Uploaded by

fahad akbar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Q1: Svenska Pharmicia, a Swedish pharmaceutical company, makes an

anticoagulant drug. The main ingredient in the drug is a raw material called
Alpha SR40. Information concerning the purchase and use of Alpha SR40
follows:
Purchase of Alpha SR40: The raw material Alpha SR40 is purchased in 2-
kilogram containers at a cost of 3,000 Kr per kilogram. (The Swedish
currency is the krona, which is abbreviated as Kr.) A discount of 2% is
offered by the supplier for payment within 10 days and Svenska Pharmicia
takes all discounts. Shipping costs, which Svenska Pharmicia must pay,
amount to 1,000 Kr for an average shipment of ten 2-kilogram containers.
Use of Alpha SR40: The bill of materials calls for 6 grams of Alpha SR40
per capsule of the anticoagulant drug. (A kilogram equals 1,000 grams.)
About 4% of all Alpha SR40 purchased is rejected as unsuitable before
being used to make the anticoagulant drug. In addition, after the addition of
Alpha SR40, about 1 out of every 26 capsules is rejected at final
inspection, due to defects of one sort or another in the capsule.

Required:
1. Compute the standard purchase price for one gram of Alpha SR40.
2. Compute the standard quantity of Alpha SR40 (in grams) per capsule
that passes final inspection.
3. using the data from (1) and (2) above, prepare a standard cost card
showing the standard cost of Alpha SR40 per capsule of the anticoagulant
drug.
Solution:
Q2: Harmon Household Products, Inc., manufactures a number of
consumer items for general household use. One of these products, a
chopping board, requires an expensive hardwood. During a recent month,
the company manufactured 4,000 chopping boards using 11,000 board feet
of hardwood. The hardwood cost the company $18,700.
The company’s standards for one chopping board are 2.5 board feet of
hardwood, at a cost of $1.80 per board foot.

Required:
1. What cost for wood should have been incurred to make 4,000 chopping
blocks? How much greater or less is this than the cost that was incurred?
2. Break down the difference computed in (1) above into a materials price
variance and a materials quantity variance.
Solution:
Q3:

Topper Toys has


developed a new toy
called the Brainbuster.
The company has a
standard
cost system to help
control costs and has
established the following
standards for the
Brainbuster toy:
Direct materials: 8 diodes
per toy at $0.30 per
diode
Direct labor: 1.2 hours
per toy at $7 per hour
During August, the
company produced 5,000
Brainbuster toys.
Production data on the
toy
for August follow:
Direct materials: 70,000
diodes were purchased
at a cost of $0.28 per
diode.
20,000 of these diodes
were still in inventory at
the end of the month.
Direct labor: 6,400 direct
labor-hours were worked
at a cost of $48,000.
Required:
1. Compute the following
variances for August:
a. Direct materials price
and quantity variances.
b. Direct labor rate and
efficiency variances.
2. Prepare a brief
explanation of the
possible causes of each
variance
Topper Toys has
developed a new toy
called the Brainbuster.
The company has a
standard
cost system to help
control costs and has
established the following
standards for the
Brainbuster toy:
Direct materials: 8 diodes
per toy at $0.30 per
diode
Direct labor: 1.2 hours
per toy at $7 per hour
During August, the
company produced 5,000
Brainbuster toys.
Production data on the
toy
for August follow:
Direct materials: 70,000
diodes were purchased
at a cost of $0.28 per
diode.
20,000 of these diodes
were still in inventory at
the end of the month.
Direct labor: 6,400 direct
labor-hours were worked
at a cost of $48,000.
Required:
1. Compute the following
variances for August:
a. Direct materials price
and quantity variances.
b. Direct labor rate and
efficiency variances.
2. Prepare a brief
explanation of the
possible causes of each
varianc
Q4:
Solution:
Q5:
Q6:
Q7:
SOLUTION:

Q8: ipex, Ltd., of Birmingham, England, is interested in cutting the amount of time between when
a customer places an order and when the order is completed. For the first quarter of the year, the
following data were reported:

Inspection time 0.5 days

Process time 2.8 days wait time 16.0 days

Que time 4.0 days

Move time 0.7 days

Compute the throughput time_____days

Compute the manufacturing cycle efficiency (MCE) for the quarter.


Q9: Aspen Products, Inc., began production of a new product on April 1. The company
uses a standard cost system and has established the following standards for one unit of the
new product:

During April, the following activity was recorded regarding the new product:

a. Purchased 7,000 feet of material at a cost of $5.75 per foot.

b. Used 6,000 feet of material to produce 1,500 units of the new product.

c. Worked 725 direct labor-hours on the new product at a cost of $8,120.


Required:

1. For direct materials:

a. Compute the direct materials price and quantity variances.

b. Prepare journal entries to record the purchase of materials and the use of materials in
production.

2. For direct labor:

a. Compute the direct labor rate and efficiency variances.

b. Prepare journal entries to record the incurrence of direct labor cost for the month.

3. Post the entries you have prepared to the T-accountsbelow:

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