Question

Butrico Manufacturing Corporation uses a standard cost system, records materials price variances when direct materials are purchased, and prorates all variances at year-end. Variances associated with direct materials are prorated based on the balances of direct materials in the appropriate accounts, and variances associated with direct labor and manufacturing overhead are prorated to Finished Goods Inventory and to Cost of Goods Sold (COGS) on the basis of the relative direct labor cost in these accounts at year-end.

The following information is for the year ended December 31:

The company had no beginning inventories and no ending Work-in-Process (WIP) Inventory. It applies manufacturing overhead at 80% of standard direct labor cost.

Finished goods inventory at 12/31:

Direct materials

$ 89,610

Direct labor

134,415

Applied manufacturing overhead

107,532

Direct materials inventory at 12/31

65,300

Cost of goods sold for the year ended 12/31:

Direct materials

$ 358,440

Direct labor

761,685

Applied manufacturing overhead

609,348

Direct materials price variance (unfavorable)

10,300

Direct materials usage variance (favorable)

15,450

Direct labor rate variance (unfavorable)

20,600

Direct labor efficiency variance (favorable)

5,150

Actual manufacturing overhead incurred

710,700

Required:

1. Compute the amount of Direct Materials Price Variance to be prorated to Finished Goods Inventory at December 31.

2. Compute the total amount of direct materials cost in the Finished Goods Inventory at December 31, after all materials variances have been prorated.

3. Compute the total amount of direct labor cost in the Finished Goods Inventory at December 31, after all variances have been prorated.

4. Compute the total Cost of Goods Sold (COGS) for the year ended December 31, after all variances have been prorated.

Direct Materials price variance ?
Direct Materials cost ?
Direct Labor Cost ?
Cost of goods sold ?

Answer 1

1. The Direct Materials Price Variance to be prorated to Finished Goods Inventory at December 31 is $10,300. 2. The total amount of direct materials cost in the Finished Goods Inventory at December 31 is $434,040. 3. The question does not provide enough information to compute the total amount of direct labor cost in the Finished Goods Inventory at December 31. 4. The question does not provide enough information to compute the total Cost of Goods Sold (COGS) for the year ended December 31.

Step-by-step explanation:

1. To compute the amount of Direct Materials Price Variance that is prorated to Finished Goods Inventory at December 31, we need to determine the total direct materials cost for the year. The direct materials cost is the sum of the direct materials purchased and the direct materials price variance (unfavorable) which needs to be prorated. Therefore, the Direct Materials Price Variance to be prorated to Finished Goods Inventory at December 31 is $10,300.

2. To compute the total amount of direct materials cost in the Finished Goods Inventory at December 31, we need to add the direct materials in the finished goods inventory to the direct materials purchase cost and the direct materials price variance, which has already been prorated. Therefore, the total amount of direct materials cost in the Finished Goods Inventory at December 31 is $65,300 + $358,440 + $10,300 = $434,040.

3. To compute the total amount of direct labor cost in the Finished Goods Inventory at December 31, we need to prorate the direct labor rate variance (unfavorable) and the direct labor efficiency variance (favorable) to the Finished Goods Inventory. Since the question does not provide the direct labor rate and efficiency variances, we cannot calculate this.

4. To compute the total Cost of Goods Sold (COGS) for the year ended December 31, we need to add the direct materials cost, direct labor cost, and applied manufacturing overhead. Since the question does not provide the applied manufacturing overhead, we cannot calculate this.