In all of the exercises involving variances, use “F” and “U” to designate favorable and unfavorable variances, respectively.
Making journal entries
Assume that during the month of April the production report of Albany Adhesives Inc. in E8-10 revealed the following information:
Units produced during the month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,000
Direct labor hours for the month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,000
Materials purchased (in pounds). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,000
Materials used (in pounds). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,000
Labor rate per hour . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10.04
Materials cost per pound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.98
Make journal entries to charge materials (use the materials purchase price variance) and labor to Work in Process. (Remember to retrieve the standard costs from E8-10 before solving this exercise.)
Reference:
Preparing a standard cost summary and making journal entries The normal capacity of Albany Adhesives Inc. is 40,000 direct labor hours and 20,000 units per month. A finished unit requires 6 lb of materials at an estimated cost of $2 per pound. The estimated cost of labor is $10.00 per hour. The plant estimates that overhead for a month will be $40,000.
During the month of March, the plant totaled 34,800 direct labor hours at an average rate of $9.50 an hour. The plant produced 18,000 units, using 105,000 lb of materials at a cost of $2.04 per pound.
1. Prepare a standard cost summary showing the standard unit cost.
2. Make journal entries to charge materials and labor to Work in Process.
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