HYDROCHEM INC.

Presented by:
Harsh Malik(058)
Naman Prabhakar(078)
Pulkit Sharma(106)
Swapnil Agrawal(152)

HYDROCHEM,INC.
HydroChem, Inc produces only one product condutronic plates. The company uses
the real value of the process, but is considering changes to the standard cost system.
Production costs consist of raw materials, direct labor and manufacturing overhead
costs, and the company uses the full absorption cost.
Companys current standard cost per plant is given as follows:
Particulars
Raw Material (4 pounds at $ 2.50/pound)
Direct Labor (0.6 hours at $ 12.00/hour)
Manufacturing Overhead (allocated)
Total Standard manufacturing cost per plate

$
$
$
$

Amount
10.00
7.20
4.45
21.65

Additionally, it is given
Particulars
Production per month
Average sales price
Fixed Manufacturing Overhead
Variable Manufacturing Overhead
Total Manufacturing Overhead
MO per plate at normal production
Time to produce each plate (in hours)

$
$
$
$
$

Amount
70000
27.00
175,000.00
136,500.00
311,500.00
4.45
1.5

Balance Sheet in the beginning

of
the
Month
Particulars
Amount
Assets
Raw Materials
(36,000 pounds at $ 2.50/pound)

90,000.00

Finished Goods
(6,100 plates at $ 21.70/plate)

$ 132,370.00

Other assets
Total Assets
Liabilties & Equity

$ 668,000.00
$ 890,370.00

Accounts payable & accrued expenses

Other liabilties
Capital Stock
Retained Earnings
Total Liabilties and Equity

$
$
$
$
$

170,370.00
140,000.00
120,000.00
460,000.00
890,370.00

Expenses incurred during

the month.
Particulars
Raw Material Purchased (in pounds)
Price per pound
Raw Material used in Production (in pounds)
Machine Hours
Direct Labor (in hours)
Average direct labor cost per hour
Fixed Manufacturing Overhead
Variable Manufacturing Overhead
Total Manufacturing Overhead
Number of Plates Produced
Number of Plates Sold
Selling Price
Accounts Receivables collected
Accounts Payable & accrued expenses paid

Amounts
360000
$
2.60
328000
116000
49600
$
11.80
$ 174,000.00
$ 162,000.00
$ 336,000.00
80000
60000
$
26.95
$ 1,400,000.00
$ 800,000.00

Question
Prepare two income statements for the
month and the balance at the end of the
month. One set of financial statements shall
be prepared using the actual costing of the
company, and another set of financial
statements shall be prepared using the
proposed standard cost system.

Refer Excel Sheet.

 Explain the differences between the two sets

of financial statements and take a position as
to which set of financial information they
should
prefer.
Actual costing and Standard costing method both
are required to get suitable information regarding
the processes and helps in identification of any
deviation from designated standard process.
Standard costing system by detecting variance in
the actual process from standard process and
helps find out whether variance is in Material,
Labor or Overhead and take suitable corrective
actions if unfavorable and controllable.
For Hydrochem Inc. since total variance is
unfavorable indicates that company is deviating
from its standard plan and can improve upon