Question

Rocky Mountain Camping Equipment, Inc. has established the following direct-material standards for its two products. 

	Standard Quantity	Standard Price
Standard camping tent	24 yards	$11.00 per yard
Deluxe backpacking tent	19 yards	$8.20 per yard

During March, the company purchased 4,400 yards of tent fabric for its standard model at a cost of $49,720. The actual March production of the standard tent was 140 tents, and 3,460 yards of fabric were used. Also during March, the company purchased 1,400 yards of the same tent fabric for its deluxe backpacking tent at a cost of $11,060. The firm used 4,180 yards of the fabric during March in the production of 220 deluxe tents.

Compute the direct-material purchase price variance and quantity variance for March.

Then prepare journal entries to record the purchase of material, use of material, and incurrence of variances in March.

Answer 1

Journal Entry
Transaction	General Journal	Debit	Credit
a.	Raw Material inventory (4400X11)+(1400X8.20)	$59,880.00
	Direct material Purchase Price variance (1320-420)	$900.00
	Account Payable (49720+11060)		$60,780.00
b.	Work in Progress Inventory ( 24 X 140X11)+ (19X220X8.20)	$71,236.00
	Direct material Quantity Variance	$1,100.00
	Raw Material Inventory (3460X11)+(4180X8.20)		$72,336.00

Standard

Material Price variance= (SP-AP)Actual Quantity Purchased

($11-11.30)X 4400=$1320 UF

Actual Price per Yeard= 49720/4400=11.30

Material Quantity Variance= ( Std Quantity for Actual Production- AQ used ) SP

((24 Yard X140)- 3460)X11=$1100

Deluxe

Material Price variance= (SP-AP)Actual Quantity Purchased

($8.20-7.90)X 1400=$420 F

Actual Price per Yeard= 11060/1400=7.90

Material Quantity Variance= ( Std Quantity for Actual Production- AQ used ) SP

((19 Yard X220)- 4180)X $8.20=o Nil