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 that all fixed overhead is applied to work in progress inventory.
Solution:
a.)
Materials Variance:
Actual cost | $37,730 | |
Split cost | $36,260(4,900 ×$7.40) | |
Standard cost | $34,040 | |
Materials price | $1,470 | U |
Materials efficiency | $2,220 | U |
Labor variance:
Actual cost | $178,920 | |
Split cost | $184,600(14,200 × $13) | |
Standard cost | $179,400 | |
Labor rate | $5,680 | F |
Labor efficiency | $5,200 | U |
Variance overhead variance:
Actual cost | $9,480 | |
Split cost | $9,940 | |
Standard cost | $9,660 | |
Variable overhead spending | $460 | F |
Variable overhead efficiency | $280 | U |
b.)
General Journal:
Description | Debit ($) | Credit ($) |
Materials inventory | 36,260 | |
Materials price variance | 1470 | |
Accounts payable | 37,730 | |
To record the purchase of direct materials | ||
Work in process inventory | 34,040 | |
Materials efficiency variance | 2,220 | |
Materials inventory | 36,260 | |
To record the use of materials | ||
Work in process inventory | 179,400 | |
Labor efficiency variance | 5,200 | |
Labor rate variance | 5,680 | |
Wages payable | 178,920 | |
To record direct labor costs and related cost variance | ||
Work in process inventory | 9,660 | |
Variable overhead efficiency variance | 280 | |
Variable overhead spending variance | 460 | |
Manufacturing overhead | 9,480 | |
To apply variable overhead to work in progress and related cost variance. | ||
Work in process inventory | 9,660 | |
Manufacturing overhead | 9,660 | |
To apply fixed overhead to work in progress |
c.) General Journal:
Description | Debit ($) | Credit ($) |
Finished goods inventory | 232,760 | |
Work in process inventory | 232,760 | |
To record completion of units | ||
Cost of goods sold ($232,760 × 8400units / 9200 units) | 212,520 | |
Finished goods inventory | 212,520 | |
To record cost of units | ||
d.)
Glendale Company
Partial Income Statement
For the month Ended May 31,2016
Sales | $453,600 | |
Cost of goods at standard cost | -$212,520 | |
Gross profit at standard cost | $241080 | |
Net cost variance : | ||
Materials | $3,690 | |
Labor | $480 | |
Overhead | $180 | -$3030 |
Gross profit at actual cost | $238,050 | |
*
Materials ($1470 + $2220) | $3,690 | U |
Labor($5680 -$5200) | $480 | F |
Variable overhead(460 - 280) | $180 | F |
Net cost variance | $3,030 | U |
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