Variances, Entries, and Income Statement
A summary of Glendale Company's manufacturing variance report for
May 2016 follows:
Total Standard Costs (9,200 units) | Actual Costs (9,200 units) | Variances | |||||||
---|---|---|---|---|---|---|---|---|---|
Direct material | $43,240 | $47,530 | $4,290 | U | |||||
Direct labor | 207,000 | 206,610 | 390 | F | |||||
Variable overhead | 37,260 | 36,880 | 380 | F | |||||
Fixed overhead | 9,660 | 9,660 | - | ||||||
$297,160 | $300,680 | $3,520 | U |
Standard material cost per unit of product is 0.5 pounds at $9.40 per pound, and standard direct labor cost is 1.5 hours at $15.00 per hour. The total actual materials cost represents 4,900 pounds purchased at $9.70 per pound. Total actual labor cost represents 14,200 hours at $14.55 per hour. According to standards, variable overhead rate is applied at $2.70 per direct labor hour (based on a normal capacity of 15,000 direct labor hours or 10,000 units of product). Assume that all fixed overhead is applied to work in progress inventory.
a. Determine the following variances:
Do not use negative signs with any of your answers. Next to each variance answer, select either "F" for Favorable or "U" for Unfavorable.
Materials Variances | ||
---|---|---|
Actual cost: | ||
Split cost: | ||
Standard cost: | ||
Materials price | FU | |
Materials efficiency | FU |
Labor Variances | ||
---|---|---|
Actual cost: | ||
Split cost: | ||
Standard cost: | ||
Labor rate | FU | |
Labor efficiency | FU |
Variable Overhead Variances | ||
---|---|---|
Actual cost: | ||
Split cost: | ||
Standard cost: | ||
Variable overhead spending | FU | |
Variable overhead efficiency | FU |
b. Prepare general journal entries to record standard costs, actual costs, and related variances for material, labor, and overhead.
General Journal | |||
---|---|---|---|
Description | Debit | Credit | |
Materials inventory | |||
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory | |||
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory | |||
To record the purches of direct materials | |||
Work in process inventory | |||
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory | |||
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory | |||
To record the use of direct materials | |||
Work in process inventory | |||
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory | |||
Labor rate variance | |||
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory | |||
To record direct labor costs and related cost variances. | |||
Work in process inventory | |||
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory | |||
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory | |||
Manufactruing overhead | |||
To apply variable overhead to work in progress and record related cost variances | |||
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory | |||
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory | |||
To apply fixed overhead to work in progress |
c. Prepare journal entries to record the transfer of all completed units to Finished Goods Inventory and the subsequent sale of 8,400 units on account at $54 each (assume no beginning finished goods inventory).
General Journal | |||
---|---|---|---|
Description | Debit | Credit | |
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory | |||
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory | |||
To record completion ofunits | |||
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory | |||
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory | |||
To record sale ofunits | |||
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory | |||
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory | |||
To record cost ofunits |
d. Prepare a partial income statement (through gross profit on sales) showing gross profit based on standard costs, the incorporation of variances, and gross profit based on actual costs.
Do not use negative signs with any of your answers below.
Glendale Company Partial Income Statement For the Month Ended May 31,2016 |
||||||
---|---|---|---|---|---|---|
Sales | ||||||
Cost of goods at standard cost | ||||||
Gross profit at standard cost | ||||||
Net cost variance | ||||||
Material | ||||||
Labor | ||||||
Variable overhead | ||||||
Gross profit at actual cost |
Variances, Entries, and Income Statement A summary of Glendale Company's manufacturing variance report for May 2016...
Standard material cost per unit of product is 0.5 pounds at
$7.40 per pound, and standard direct labor cost is 1.5 hours at
$13.00 per hour. The total actual materials cost represents 4,900
pounds purchased at $7.70 per pound. Total actual labor cost
represents 14,200 hours at $12.60 per hour. According to standards,
variable overhead rate is applied at $0.70 per direct labor hour
(based on a normal capacity of 15,000 direct labor hours or 10,000
units of product). Assume...
I need help with the x's. Please explain how you got those if
you can. Thanks
QUESTION 5 Partially correct Mark 76.00 out of 89.00 P Flag question Variances, Entries, and Income Statement A summary of Glendale Company's manufacturing variance report for May 2016 follows Direct material Direct labor Variable overhead Fixed overhead Total Standard Costs (9,200 units) Actual Costs (9,200 units) Variances $52,430 $4,590 U 220,100 700 F 50,550 510 F $47,840 220,800 51,060 9,660 $329,360 9,660 5332,740 $3,380...
Material, Labor, and Variable Overhead Variances The following summarized manufacturing data relate to Kiosse Corporation's May operations, during which 2,000 finished units of product were produced. Normal monthly capacity is 1,100 direct labor hours. Standard Units Costs Total Actual Costs $13,640 Direct material Standard (3 lb. @ $2.00/lb.) Actual (6,200 lb. @ $2.20/lb.) Direct labor Standard (0.5 hr. @ $14/hr.) Actual (980 hrs. @ $13.70/hr.) Variable overhead Standard (0.5 hr. @ $4/hr.) Actual Total 13,426 $15 4,200 $31,266 Assume that...
Material, Labor, and Variable Overhead Variances The following summarized manufacturing data relate to Kiosse Corporation's May operations, during which 2,000 finished units of product were produced. Normal monthly capacity is 1,100 direct labor hours. Standard Units Costs Total Actual Costs Direct material $6 Standard (3 lb. @ $2.00/lb.) Actual (6,200 lb. @ $2.20/lb.) Direct labor $13,640 $7 Standard (0.5 hr. @ $14/hr.) Actual (980 hrs. @ $13.70/hr.) Variable overhead 13,426 Standard (0.5 hr. @ $4/hr.) Actual 4,200 $31,266 Total $15...
Material, Labor, and Variable Overhead Variances The following summarized manufacturing data relate to Steffan Corporation's April operations, during which 2,000 finished units of product were produced. Normal monthly capacity is 1,100 direct labor hours. Standard Units Costs Total Actual Costs Direct material Standard (2 lb. @ $9.50/lb.) $19 Actual (4,200 lb. @ $10.20/lb.) $42,840 Direct labor Standard (0.5 hr. @ $24/hr.) $12 Actual (970 hrs. @ $23.40/hr.) 22,698 Variable overhead Standard (0.5 hr. @ $6/hr.) Actual 6,200 Total $71,738 Assume...
Material, Labor, and Variable Overhead Variances The following summarized manufacturing data relate to Kiosse Corporation’s May operations, during which 2,000 finished units of product were produced. Normal monthly capacity is 1,100 direct labor hours. Standard Units Costs Total Actual Costs Direct material Standard (3 lb. @ $2.00/lb.) $6 Actual (6,200 lb. @ $2.20/lb.) $13,640 Direct labor Standard (0.5 hr. @ $14/hr.) $7 Actual (980 hrs. @ $13.70/hr.) 13,426 Variable overhead Standard (0.5 hr. @ $4/hr.) $2 Actual - 4,200 Total...
Mastery Problem: Manufacturing Cost Variance (Actual Costs Compared to Standard Costs) Manufacturing cost variances may come from material costs that are higher or lower than expected, material usage that is not what was expected, higher or lower labor costs than expected, or more or less time spent to produce an item than expected. Overhead cost and volume variances are another cause for costs to be higher or lower than what was expected. The total manufacturing variance can be broken down...
Material, Labor, and Variable Overhead Variances The following summarized manufacturing data relate to Steffan Corporation's April operations, during which 2,000 finished units of product were produced. Normal monthly capacity is 1,100 direct labor hours. Standard Units Costs Total Actual Costs Direct material Standard (2 lb. @ $9.50/lb.) $19 Actual (4,200 lb. @ $10.20/lb.) $42,840 Direct labor Standard (0.5 hr. @ $24/hr.) $12 Actual (970 hrs. @ $23.40/hr.) 22,698 Variable overhead Standard (0.5 hr. @ $6/hr.) $3 6,200 Actual $34 $71,738...
Petrillo Company produces engine parts for large motors. The company uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products (a valve) is as follows:Direct materials (7 lbs. @ $5.40)$37.80Direct labor (1.75 hrs. @ $18)31.50Variable overhead (1.75 hrs. @ $4.00)7.00Fixed overhead (1.75 hrs. @ $3.00)5.25 Standard cost per unit$81.55During the year, Petrillo had the following activity related to valve production:Production of valves totaled 20,600 units.A total of 135,600 pounds of...
Porter Manufacturing Company uses the perpetual inventory system to account for its manufacturing inventories. The following are Porter's transactions during September 2016 Sept. 5 Received material costing $6,000 from a supplier. The material was purchased on account. 9 Requisitioned $14,000 of material for use in the factory, consisting of $11,200 of direct material and $2,800 of indirect material. 11 Recorded the factory payroll: $28,000 of direct labor and $4,000 of indirect labor. 17 Incurred various overhead costs totaling $30,000. (Credit...