The revenue and cost information for Odessa Outfitters inc. for 2015 follows: Sa

Question

The revenue and cost information for Odessa Outfitters inc. for 2015 follows:

Sales Revenue       560,000

COGS (at standart) 342,000

DM price variance      1,000 F

DM quantity variance 6,000 F

DL rate varinace          4,000U

DL efficiency variance 2,000 F

Overhead controllable variance 3,500U

Overhead volüme variance    8,000f

a)What is gross profit at standard?

b)What is gross profit actual?

c)Write journal entries for all variance accounts assuming all units are produced and sold in the same period.

Explanation / Answer

Solution a:

Gross profit at standard = Revenue - COGS (at standard) = $560,000 - $342,000 = $218,000

Solution b:

Gross Profit Actual = Gross Profit at Standard + Favorable variance - Unfavorable variances

= $218,000 + $1,000 + $6,000 - $4,000 +$2,000 - $3,500 + $8,000 = $227,500

Solution c:

Journal Entries - Odessa Outfitters inc. Event Particulars Debit Credit 1 DM price variance Dr $1,000.00 DM quantity variance Dr $6,000.00 DL efficiency variance Dr $2,000.00 Overhead volume variance Dr $8,000.00            To Cost of goods sold $17,000.00 (To close Favorable variances to COGS) 2 Cost of goods sold Dr $7,500.00            To DL Rate variance $4,000.00            To Overhead controllable variance $3,500.00 (To close Unfavorable variances to COGS)

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