Journal Entries in a Standard Cost System Boron Chemical Company produces a synthetic resin that is used in the automotive industry. The company uses a standard cost system. For each gallon of output, the following direct manufacturing costs are anticipated:
Direct labor: 2 hours at $25.00 per hour | $50.00 |
Direct materials: 2 gallons at $10.00 per gallon | $20.00 |
During December of 2010, Boron produced a total of 2,500 gallons of output and incurred the following direct manufacturing costs:
Direct labor: 4,900 hours worked @ an average wage rate of $19.50 per hour Direct materials:
Purchased: 6,000 gallons @ $10.45 per gallon
Used in production: 5,100 gallons
Boron records price variances for materials at the time of purchase.
Required Give journal entries for the following events and transactions:
1. Purchase, on credit, of direct materials.
2. Direct materials issued to production.
3. Direct labor cost of units completed this period.
4. Direct manufacturing cost (direct labor plus direct materials) of units completed and transferred to Finished Goods Inventory.
5. Sale, for $150 per gallon, of 2,000 gallons of output. (Hint: You will need two journal entries here.)
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