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Posted: June 14th, 2023
Accelerator, Inc. manufactures a fuel additive, Stomp
P8-3 Accelerator, Inc. manufactures a fuel additive, Stomp, that has a stable selling price of $44 per drum. The company has been producing and selling 80,000 drums per month.In connection with your examination of Acceleratorâs financial statements for the year ended September 30, management has asked you to review some computations made by Acceleratorâscost accountant. Your working papers disclose the following about the companyâs operations:Standard costs per drum of product manufactured:Materials:8 gallons of chemicals@$2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $161 empty drum @ $1/drum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 $17Direct labor: 1 hour @ $8/hour . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8Factory Overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6Costs and expenses during September:Stomp: 600,000 gallons purchased at a cost of $1,140,000; 645,000 gallons used.Empty drums: 94,000 purchased at a cost of $94,000; 80,000 drums used.Direct labor: 81,000 hours worked at a cost of $654,480.Factory overhead: $768,000.Required:Calculate the following variances for September1. Materials quantity variance.2. Materials purchase price variance.3. Labor efficiency variance.4. Labor rate variance.
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