Question

Mcknight manufactures coffee mugs that it sells to other companies for customizing with their own logos. McKnight calculated the following varlances and recorded the following entries for July 2018. EEB (Click the icon to view the cost data.) Clck the ioan to view variances.) Actual cost and praduction information for July 2018 follows: (Click the ioan to view jounal entries.) (Click the lcon to view actual cost and production information.) Prepare the standard costing income statement for July 2018. (Use a minus sign or parentheses to enter any contra expenses andfor an operating loss. Enter all other amounts as posltive numbers.) Mcknight's standard and actual salos price per mug is $3. Data Table More Info McKnight prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 60,100 coffee There were no beginning ar ending inventory balances. All expenditures were on a. account mugs per month: b. Actual production and sales were 62,800 coffee mugs. Actual direct materials usage was 10,000 lbs, at an actual cost of $0.17 perlb. c. S 0.25 per lb) S 0.05 Direct Materials 0.2 lbs d. Actual direct labor usage was 201,000 minutes at a total cost of $26,130. Direct Labor 3 minutesS 0.10 per minute) 0.30 Actual overhead cost was $9,045 variable and $31,355 fixed. e. Manufacturing Overhead: f. Selling and administrative costs were 5103,000 Variable 3 minutesS 0.06 per minute) 0.18 0.45 0.63 Fixed 3 minutes@S 0.15 per minute) Print Done S 0.98 Total Cost per Coffee Mug Reference Date Debit Credit Accounts and Explanation 2,500 Jul Raw Materials Inventory Direct Materials Cost Variance 800 1,700 Accounts Payable Purchased direct materials 3,140 Jul. Work-in-Process Inventory Direct Materials Efficiency Variance 640 Raw Materials Inventory 2,500 Used direct materials Jul Work-in-Process Inventory 18,840 6,030 Direct Labor Cost Variance Direct Labor Efficiency Variance 1,260 Wages Payable 26,130 Direct labor costs incurred Jul. Manufacturing Overhead 40,400 Various Accounts 40,400 Manufacturing overhead costs incurred 39,564 Jul Work-in-Process Inventory Manufacturing Overhead 39,564 Manufacturing overhead costs allocated Jul.Finished Goods Inventory 61,544 Work-in-Process Inventory 61,544 Completed goods transferred Jul Variable Overhead Efficiency Variance 756 4,310 Fixed Overhead Cost Variance 3,015 Variable Overhead Cost Variance 1,215 Fixed Overhead Volume Variance 836 Manufacturing Overhead To adjust Manufacturing Overhead Variance Direct materials cost variance- 800 F - S 6,030 U Direct labor cost variance Variance Direct materials efficiency variance 640 F Direct labor efficiency variance -$ 1,260 U Variance VOH cost variance - $ 3,015 F VOH efficiency variance$ 756 U Variance 4,310 U FOH cost variance FOH volume variance 1,215 F McKnight Standard Cost Income Statement For the Month Ended July 31, 2018 Gross Profit Operating Income (Loss)

Answer 1

McKnight
Standard Cost Income Statement
For the Month Ended July 31, 2018
Sales revenue (62800 x $3)			188400
Cost of goods sold at standard (62800 x $0.98)		61544
Manufacturing cost variances:
Direct materials cost variance	-800
Direct materials efficiency variance	-640
Direct labor cost variance	6030
Direct labor efficiency variance	1260
Variable overhead cost variance	-3015
Variable overhead efficiency variance	756
Fixed overhead cost variance	4310
Fixed overhead volume variance	-1215
Total manufacturing variances		6686
Cost of goods sold at actual			68230
Gross profit			120170
Selling and administrative expenses			108000
Operating income (loss)			12170

Note: Favorable variances are deducted while unfavorable variances are added to the standard cost of goods sold to arrive at the actual cost of goods sold.