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# ACCT346 Week 6 Homework Notes with Answers

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ACCT346 Week 6 Homework Notes with Answers
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ACCT346 Week 6 Homework Notes with Answers
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Date Created: 01/06/16
DeVry University ACCT346 Weekly Assignment– ANSWERS Week 6 1.  Cave Hardware's forecasted sales for April, May, June, and July are \$200,000, \$230,000, \$190,000, and  \$240,000, respectively. Sales are 65% cash and 35% credit, with all accounts receivable collected in the  month following the sale. Cost of goods sold is 75% of sales and ending inventory is maintained at  \$60,000 plus 10% of the following month's cost of goods sold. All inventory purchases are paid 22% in the month of purchase and 78% in the following month. What are the total cash collections budgeted for June?   Answer:   Total Cash Collections expected in June = June cash sales + May credit sales (receivables later collected during June) = (\$190,000 × 0.65) + (\$230,000 × 0.35) = \$123,500 + 80,500 = \$204,000 2.  Madden Corporation manufactures T­shirts (its only product). The company’s standards for  manufacturing T­shirts are as follows: Standard direct labor cost per hour \$ 17 per hour Standard direct labor hours per T­shirt 0.6 hours During the month of January, the company produced 1,250 T­shirts. Related production data for  the month follows: Actual direct labor hours 770 hours Actual direct labor cost incurred \$ 13,000 2a. What is the direct labor rate variance for the month? Is it favorable or unfavorable? Answer:  First, note that the actual labor rate per hour that was paid by the company during this period was: \$13,000 / 770 hours (which calculates to just a little bit over \$16.88 per hour) Labor Rate Variance = (AR – SR)*AH AR = actual labor rate per hour SR = standard labor rate per hour AH = actual hours worked Labor Rate Variance  = (actual labor rate per hour – standard labor rate per hour) × actual hours worked = (\$13,000 / 770 hours – \$17 per hour) × 770 hours = \$90 FAVORABLE (since we only paid about \$16.88 per hour and the standard is \$17) Also note that the negative sign is inconsequential for expressing this result, and  students’ answers may differ by a couple of dollars based upon precision applied. 2b. What is the direct labor efficiency variance for the month? Is it favorable or unfavorable? Answer: First, note that the standard hours of labor that we would have expected to produce  1250 units would be: 1250 units × 0.6 hours per unit (which calculates to 750 standard hours) Labor Efficiency Variance = (AH – SH)*SR AH = actual hours worked SH = standard hours of labor (that should have been used for the actual level of production) SR = standard labor rate per hour Labor Efficiency Variance  = (actual hours worked – standard hours for # of units produced) × standard labor rate  = (770 hours – 750 hours) × \$17 per hour = \$340 UNFAVORABLE (since our staff actually worked more hours than the standard  would indicate should have been worked to produce 1,250 units)

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