P23-6B Journalize and post standard cost entries, and prepare income statement F
ID: 1188932 • Letter: P
Question
P23-6B Journalize and post standard cost entries, and prepare income statement Frio Company uses standard costs with its job order cost accounting system. In January, an order (Job No. 84) was received for 5,500 units of Product D . The standard cost of one unit of Product D is as follows. Direct materials 1.5 pounds at $4.00 per pound $6.00 Direct labor 1 hour at $9.00 per hour 9.00 Overhead 1 hour (variable $7.40; fixed $8.00 15.40 Standard cost per unit $30.40 Overhead is applied on the basis of direct labor hours. Normal capacity for the month of January was 6,000 direct labor hours. During January, the following transactions applicable to Job No, 48 occurred. 1. Purchased 8,100 pounds of raw materials on account at $3.70 per pound. 2. Requisitioned 8,100 pounds of raw materials for production. 3. Incurred 5,200 hours of direct labor at a rate of $9.20 per hour. 4. Worked 5,200 hours of direct labor on Job No.84. 5. Incurred $87,500 of manufacturing overhead on account. 6. Applied overhead to Job No. 84 on basis of direct labor hours. 7. Transferred Job NO. 84 to finished goods. 8. Billed customer for Job No. 84 at a selling price of $270,000. Instructions (a) Journalize the transactions. (b) Post to the job order cost accounts. (c ) Prepare the entry to recognize the total overhead variance. (d) Prepare the January 2014 income statement for management. Assume selling and administrative expenses were $60,000. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . (a)(1) Account Value Account Value Account Value (a)(2) Account Value Account Value Account Value (a)(3) Account Value Account Value Account Value (a)(4) Account Value Account Value Account Value (a)(5) Account Value Account Value (a)(6) Account Value Account Value (a)(7) Account Value Account Value (a)(8) Account Value Account Value Account Value Account Value (b) Raw Materials Inventory Materials Price Variance Work in Process Inventory Value Value Value Value Value Value Value Factory Labor Materials Quantity Variance Finished Goods Inventory Value Value Value Value Value Manufacturing Overhead Labor Price Variance Cost of Goods Sold Value Value Value Value Labor Quantity Variance Value (c ) Account Value Account Value (d) FRIO COMPANY Income Statement For the Month Ended January 31, 2014 Sales revenue Value Cost of goods sold (at standard) Value Gross profit (at standard) Value Variances Material price Value Materials quantity Value Labor price Value Labor quantity Value Overhead Value Total variance - favorable Value Gross profit (actual) Value Selling and administrative expenses Value Net income Value P23-6B Journalize and post standard cost entries, and prepare income statement Frio Company uses standard costs with its job order cost accounting system. In January, an order (Job No. 84) was received for 5,500 units of Product D . The standard cost of one unit of Product D is as follows. Direct materials 1.5 pounds at $4.00 per pound $6.00 Direct labor 1 hour at $9.00 per hour 9.00 Overhead 1 hour (variable $7.40; fixed $8.00 15.40 Standard cost per unit $30.40 Overhead is applied on the basis of direct labor hours. Normal capacity for the month of January was 6,000 direct labor hours. During January, the following transactions applicable to Job No, 48 occurred. 1. Purchased 8,100 pounds of raw materials on account at $3.70 per pound. 2. Requisitioned 8,100 pounds of raw materials for production. 3. Incurred 5,200 hours of direct labor at a rate of $9.20 per hour. 4. Worked 5,200 hours of direct labor on Job No.84. 5. Incurred $87,500 of manufacturing overhead on account. 6. Applied overhead to Job No. 84 on basis of direct labor hours. 7. Transferred Job NO. 84 to finished goods. 8. Billed customer for Job No. 84 at a selling price of $270,000. Instructions (a) Journalize the transactions. (b) Post to the job order cost accounts. (c ) Prepare the entry to recognize the total overhead variance. (d) Prepare the January 2014 income statement for management. Assume selling and administrative expenses were $60,000. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . (a)(1) Account Value Account Value Account Value (a)(2) Account Value Account Value Account Value (a)(3) Account Value Account Value Account Value (a)(4) Account Value Account Value Account Value (a)(5) Account Value Account Value (a)(6) Account Value Account Value (a)(7) Account Value Account Value (a)(8) Account Value Account Value Account Value Account Value (b) Raw Materials Inventory Materials Price Variance Work in Process Inventory Value Value Value Value Value Value Value Factory Labor Materials Quantity Variance Finished Goods Inventory Value Value Value Value Value Manufacturing Overhead Labor Price Variance Cost of Goods Sold Value Value Value Value Labor Quantity Variance Value (c ) Account Value Account Value (d) FRIO COMPANY Income Statement For the Month Ended January 31, 2014 Sales revenue Value Cost of goods sold (at standard) Value Gross profit (at standard) Value Variances Material price Value Materials quantity Value Labor price Value Labor quantity Value Overhead Value Total variance - favorable Value Gross profit (actual) Value Selling and administrative expenses Value Net income ValueExplanation / Answer
1 a) Raw Material (8100pounds *3.7/pound) Dr 29970
To Accounts Payable 29970
2) Work in process Inventory a/c Dr 29970
To Raw Material Inventory a/c 29970
3) Direct Wages a/c (5200 hours *9.2 /hr) Dr 47840
To Wages Payable a/c 47840
4) Work in Process Inventory a/c Dr 47840
To Direct Wages a/c 47840
5) Manufacturing Overhead a/c (5200 * 15.4) Dr 87500
To Accounts payable a/c 87500
6) Manufacturing Overhead Applied to Job no. 84 which includes only 5200 hours so the rest will be the part of WIP
Work in process a/c Dr 87500
To Manufacturing a/c 87500
7) Manufacturing of 1unit takes 1 hour as indicated by cost of one unit given information. And it is given 5200 hours are used, so 5200 units are produced. Rest is in Work in Process only.
Direct material = 5200 units * 1.5 pound/unit =7800 pounds used for finished goods out of purchased 8100 pounds
Material Cost for 7800 pounds material= 7800pounds * 3.7/pound = 28860
Entry
Finished Goods Inventory a/c [ 29970 (material cost) + 47840 (labour cost) + 87500 (overhead) ] Dr 165310
To Work in process Inventory a/c 165310
8) Accounts Receivable a/c (figure given in question) Dr 270000
To Sales A/c 270000
b) Variances
Material Variance = [ {5500*1,5 = 8250} - 8100 ] * 1.5 = 225 (favorable)
Price Variance = ( 4-3.7) * 8100 = 2430 (favourabel)
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