Seven enterprises is a large producer of gourmet per food.During April, it produ

Question

Seven enterprises is a large producer of gourmet per food.During April, it produced 147 batches of puppy meal. Each batchweights 1,000 pounds. To produce this quantity of output, thecompany purchase d and used 148,450 pounds of direct materials at acost of $$593,800. It also incurred direct labor costs of $17,600for ht 2,200 hours worked by employees on the puppy meal crew.Manufacturing overhead incurred at the puppy meal plant duringApril totaled $3,625, of which $2,450 was considered fixed.Seven’s standard cost information for 1,000-pound batches ofpuppy meal is as follows:

           Direct materials standardprice……………………………………………$4.20per pound

Standard quantity allowed perbatch……………………………………….1,020 pounds

Direct labor standardrate…………………………………………………..$8.50per hour

Standard hours allowed perbatch……………………………………14direct labor hours

Fixed overheadbudgeted……………………………………………$2,800per month

Normal level ofproduction…………………………………………140batches per month

Variable overhead applicationrate…………………………………$9.00 per batch

Fixed overhead application rate($2,800 / 140batches)…………….20.00 perbatch

Total overhead applicationrate……………………………………..$29.00per batch

Instructions:

a.       Compute the materials priceand quantity variances.

b.      Compute the labor rate andefficiency variances

c.       Compute the manufacturingoverhead spending and volume variances.

d.      Record the journal entry to chargematerials (at standard) to work in process.

e.       Record the journal entry tocharge direct labor (at standard) to work in process.

f.       Record the journal entry tocharge manufacturing overhead (at standard) to work in process.

g.      Record the journal entry totransfer the 147 batches of puppy meal produced in April tofinished goods.

h.      Record the journal entry to closeany over-or under applied overhead to cost of goods sold.

Explanation / Answer

a. Compute the materials price and quantityvariances     ==================================         Materials PriceVariance  =   (SP perpound   -   AP per pound) x Actualusage                                           =   ($4.20- $4.00) x148,450      =   $29,690F          Materials QuantityVariance   =   (SQ   -   AQ)   xSP                                                   =  [ (147batches x 1020 pounds per batch) - 148,250(Actual Usage) ] x$4.20                                                   =   $6,258F b. Compute the labor rate and efficiency variances     ================================    Labor ratevariance   =   (Standard Labor Rate -Actual Labor Rate) x Actual Time                                    =    ($8.50- $8.00) x2,200   =   $1,100 F           Labor efficiencyvariance   =   (Standard Time -Actual Time) x Standard Rate                                             =   [(14DLH per batch x 147 batches) - 2,200 (Actual DLH )] x$8.50                                            =   [2,058 - 2,200] x$8.50   =   $1,207 U

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