Problem - Marina Del Rey Manufacturing Corp. uses a standard cost system that records raw materials at actual cost, records materials price variances at the time that raw materials are issued to work in process, and prorates all variances at year-end. Variances associated with direct materials balances in the appropriate accounts, and variances associated with direct labor are prorated based on the direct labor balances in the appropriate accounts. The following information is available for Marina del Rey for the year ended December 31:
Raw Materials inventory at Dec. 31 $65,000
Finished Goods Inventory at December 31:
Direct Materials $87000
Direct Labor $130500
Applied Factory overhead $104400
Cost of goods sold for the year ended December 31:
Direct Materials $348000
Direct Labor $739500
Applied Factory Overhead $591600
Materials quantity variance (Favorable) $15000
Materials price variance (unfavorable) $10000
Labor efficiency variance (Favorable) $5000
Labor Rate Variance (Unfavorable) $20000
Factory Overhead applied $696000
There were no beginning inventories and no ending work in process inventory.
Required: Calculate the following
1) Amount of materials price variance to be prorated to finished goods inventory at Dec. 31 (Hint: You must first determine the ratio of direct materials cost in the ending finished goods inventory).
2) Total amount of direct materials cost in the finished goods inventory at Dec. 31, after all variances have been prorated.
3) Total amount of direct labor cost in the finished goods inventory at Dec 31, after all variances have been prorated.
4) Total cost of goods sold for the year ended Dec. 31, after all variances have been prorated.