Harvard Compute the Direct Material Variance and Conversion Cost Variance Questions

Mirror Products manufactures mirrors and uses a standard process costing system.

The following production and cost data are based on June 2022. This information represents the standard cost of one unit:

Direct material

6.50SAR

Conversion

12.50SAR

Total manufacturing cost

19.00SAR

Beginning WIP

20,000 units (100% DM; 80% conversion)

Started in June

180,000 units

Completed in June

140,000 units

Ending WIP

??? (100%DM 60% conversion)

Actual costs for June:

Direct material

1,500,000SAR

Conversion

2,000,000SAR

Total actual cost

3,500,000SAR

1. Prepare an equivalent unit of production schedule.

2. Prepare a cost of production report and assign costs to goods transferred and to inventory.

3. Compute the direct material variance and conversion cost variance. Show all work. What is the total amount to be booked against the cost of goods sold?

As a conclusion, please address the following:

4. Based on your analysis above, does this product appear to be a good source of income for the firm? Should it continue operations? Why or why not?