Prepare a 2014 income statement through gross profit for Dvorak Company, using the variance data

Prepare a 2014 income statement through gross profit for Dvorak Company, using the variance data in Practice Exercises 23-1B, 23-2B, 23-3B, and 23-4B. Assume Dvorak sold 1,000 units at $90 per unit.

Answer:


DVORAK COMPANY 
Income Statement Through Gross Profit 
For the Year Ended December 31, 2014 
Sales (1,000 units × $90) $90,000 
Cost of goods sold—at standard* 69,500 
Gross profit—at standard $20,500 
    F
avorable Unfavorable  
Less variances from standard cost:    
Direct materials price (PE23–1B)  $2,250  
Direct materials quantity (PE23–1B) $1,250   
Direct labor rate (PE23–2B) 1,400   
Direct labor time (PE23–2B) 3,400   
Factory overhead controllable (PE23–3B) 200   
Factory overhead volume (PE23–4B)  300 3,700 
Gross profit   $24,200 
    
* Direct materials (1,000 units × 5 lbs. × $2.50)…………………………………………………… 

$12,500 
Direct labor (1,000 units × 3 hrs. × $17.00)……………………………………………………… 51,000 
Factory overhead [1,000 units × 3 hrs. × ($1.40 + $0.60)]………………………………………     6,000 
Cost of goods sold at standard…………………………………………………………………… $69,500 

Dvorak Company produced 1,000 units that require five standard pounds per unit at $2.50 standard price

Dvorak Company produced 1,000 units that require five standard pounds per unit at $2.50 standard price per pound. The company actually used 4,500 pounds in production. Journalize the entry to record the standard direct materials used in production.

Answer:

Work in Process (5,000* lbs. × $2.50) 12,500  

Direct Materials Quantity Variance**  1,250 

Materials (4,500 lbs. × $2.50)  11,250 

* 1,000 units × 5 standard lbs. per unit 

** [(4,500 lbs. – 5,000 lbs.) × $2.50] 

Dvorak Company produced 1,000 units of product that required three standard hours per unit

Dvorak Company produced 1,000 units of product that required three standard hours per unit. The standard fixed overhead cost per unit is $0.60 per hour at 3,500 hours, which is 100% of normal capacity. Determine the fixed factory overhead volume variance.

Answer:
$300 unfavorable $0.60 × [3,500 hrs. – (1,000 units × 3 hrs.)]

Dvorak Company produced 1,000 units of product that required three standard hours per unit

Dvorak Company produced 1,000 units of product that required three standard hours per unit. The standard variable overhead cost per unit is $1.40 per hour. The actual variable factory overhead was $4,000. Determine the variable factory overhead controllable variance.

Answer:


Variable Factory Overhead 
Controllable Variance  = 

Variable Factory Overhead 
$4,000 – [$1.40 × (1,000 units × 3.0 hrs.)] 
Controllable Variance  =  $4,000 – $4,200 
Variable Factory Overhead 
Controllable Variance  = –$200 Favorable 

Dvorak Company produces a product that requires three standard hours per unit at a standard hourly rate of $17

Dvorak Company produces a product that requires three standard hours per unit at a standard hourly rate of $17 per hour. If 1,000 units required 2,800 hours at an hourly rate of $16.50 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) cost variance?

Answer:

a. Direct labor rate 

variance (favorable) 

–$1,400 [($16.50 – $17.00) × 2,800 hrs.] 

b. 

Direct labor time 

variance (favorable) 

–$3,400 

[(2,800 hrs. – 3,000 hrs.) × $17.00] 

c. 

Direct labor cost 

–$4,800 

(–$1,400 – $3,400) or 

 variance (favorable)  [($16.50 × 2,800 hrs.) – ($17.00 × 3,000 hrs.)] 

   = $46,200 – $51,000 

Dvorak Company produces a product that requires five standard pounds per unit. The standard price is $2.50

Dvorak Company produces a product that requires five standard pounds per unit. The standard price is $2.50 per pound. If 1,000 units required 4,500 pounds, which were purchased at $3.00 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) cost variance?

Answer:

a. Direct materials price 

variance (unfavorable) 

$2,250 [($3.00 – $2.50) × 4,500 lbs.] 

b. Direct materials quantity –$1,250 [(4,500 lbs. – 5,000 lbs.) × $2.50] 

 variance (favorable)   

c. 

Direct materials cost 

variance (unfavorable) 

$1,000 

($2,250 – $1,250) or 

[($3.00 × 4,500 lbs.) – ($2.50 × 5,000 lbs.)] 

= $13,500 – $12,500