Question

Required information Journal Entries under Standard Costing (Appendix), Posting Journal Entries for Variances (Appendix) (LO 10-6, 10-9) [The following information applies to the questions displayed below.) Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller. Direct Labor: Quantity, 0.25 hour Rate, $16 per hour Direct Material: Quantity, 4 kilograms Price, $0.80 per kilogram Actual material purchases amounted to 240,000 kilograms at $.81 per kilogram. Actual costs incurred in the production of 50,000 units were as follows: Direct labor: Direct material: $211,900 for 13,000 hours $170, 100 for 210,000 kilograms Exercise 10-31 Required: Prepare the following journal entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

Answer 1

Journal entry

Account title	Debit	Credit
Cost of goods sold Direct materials price variance Direct materials quantity variance Direct labor rate variance Direct labor efficiency variance	$22000 . . . .	. $2100 $8000 $3900 $8000

calculations:

(A)

Material price variance = actual quantity x (standard price - actual price)

= 210000 x ($0.80 - $0.81)

= $2100 Unfavorable

Where,

Actual price = material cost paid/units of material purchased

= $170100/210000 = $0.81

(B)

Material quantity variance = standard price x (standard quantity - actual quantity)

= $0.80 x (200000 - 210000)

= $8000 Unfavorable

Where,

Standard quantity = actual output x standard quantity per unit of output

= 50000 x 4 = 200000 kg

(C)

Labor rate variance = actual hours x (standard rate - actual rate)

= 13000 x ($16 - $16.3)

= $3900 Unfavorable

Where,

Actual rate = actual labor cost/actual hours

= $211900/13000 = $16.3

(D)

Labor efficiency variance = standard rate x (standard hours - actual hours)

= $16 x (12500 - 13000)

= $8000 Unfavorable

Where,

Standard hours = actual output x standard hours per unit of output

= 50000 x 0.25 = 12500 hours