Question

Maple Leaf Production manufactures truck tires. The following information is available for the last operating period.

• Maple Leaf produced and sold 95,000 tires for $45 each. Budgeted production was 99,000 tires.
• Standard variable costs per tire follow.

Direct materials: 4 pounds at $2.00	$	8.00
Direct labor: 0.40 hours at $18.50		7.40
Variable production overhead: 0.25 machine-hours at $14 per hour		3.50
Total variable costs	$	18.90

• Fixed production overhead costs:

Monthly budget $1,400,000

• Fixed overhead is applied at the rate of $15.00 per tire.
• Actual production costs:

Direct materials purchased and used: 384,000 pounds at $1.70	$	652,800
Direct labor: 36,500 hours at $18.80		686,200
Variable overhead: 25,000 machine-hours at $14.50 per hour		362,500
Fixed overhead		1,401,000

Required:
(Appendix) Prepare the journal entries to record the activity for the last period using standard costing. Assume that all variances are closed to cost of goods sold at the end of the operating period.

A

• Record entry for direct material costs payable and material variances.

• B

• Record entry for direct labor costs payable and labor variances.

• C

  Record the entry for variable overhead applied.

• D

  Record the entry for variable overhead payable.

• E

  Record the variable overhead variances.

• F

  Record the entry for fixed overhead applied.

• G

  Record the entry for fixed overhead payable.

• H

  Record the fixed overhead variances.

• I

  Record entry to transfer finished goods to inventory.

• J

  Record sales on accounts.

• K

  Record cost of goods sold.

• L

• Record the disposition of variances to cost of goods sold.

Answer 1

General Journal	Debit	Credit
Direct materials:
Work-in-process inventory	760,000
Materials efficiency variance	8,000
Materials price variance		115,200
Accounts payable		652,800
Direct labor:
Work-in-process inventory	703,000
Direct labor price variance	10,950
Direct labor efficiency variance		27,750
Accounts payable		686,200
Variable overhead:
Work-in-process inventory	332,500
Variable overhead applied		332,500
Variable overhead actual	362,500
Miscellaneous payables and inventory accounts		362,500
Variable overhead applied	332,500
Variable overhead price variance	12,500
Variable overhead efficiency variance	17,500
Variable overhead actual		362,500
Fixed overhead:
Work-in-process inventory	1,425,000
Fixed overhead applied		1,425,000
Fixed overhead actual	1,401,000
Miscellaneous payables and inventory accounts		1,401,000
Fixed overhead applied	1,425,000
Fixed overhead price variance	1,000
Fixed overhead production volume variance		25,000
Fixed overhead actual		1,426,000
Transfer to Finished Goods
Finished goods inventory	3,220,500
Fixed overhead actual		3,220,500
Record the sale of 46,000 tires at $80.
Accounts receivable	4,275,000
Sales revenue		4,275,000
Cost of goods sold	3,220,500
Finished goods inventory		3,220,500
Record the disposition of variances.
Materials price variance	115,200
Direct labor efficiency variance	27,750
Fixed overhead production volume variance	25,000
Cost of goods sold		118,000
Materials efficiency variance		8,000
Direct labor price variance		10,950
Variable overhead price variance		12,500
Variable overhead efficiency variance		17,500
Fixed overhead price variance		1,000

WORKING

Direct Materials
Actual costs	$          652,800
Actual quantity at std price	$          768,000
2*384000
Std inputs for actual quantity	$          760,000
4*95000*2
Price variance	$          115,200	F
768000-652800
Efficiency variance	$               8,000	U
768000-760000
Direct Labor
Actual costs	$          686,200
Actual quantity at std price	$          675,250
18.5*36500
Std inputs for actual quantity	$          703,000
0.4*18.5*95000
Price variance	$             10,950	U
675250-686200
Efficiency variance	$             27,750	F
675250-703000
Variable overhead
Actual costs	$          362,500
Actual quantity at std price	$          350,000
14*25000
Std inputs for actual quantity	$          332,500
14*0.25*95000
Price variance	$             12,500	U
350000-362500
Efficiency variance	$             17,500	U
350000-332500
Fixed Overhead
Actual costs	$       1,401,000
Budgeted	$       1,400,000
Applied OH	$       1,425,000
15*95000
Price variance	$               1,000	U
1400000-1401000
Production volume variance	$             25,000	F
1400000-1425000
Fixed overhead variance	$             24,000	F
1000+25000