7. Recording Journal entries for direct materials variances Rocky Mountain Outdo

Question

7. Recording Journal entries for direct materials variances

Rocky Mountain Outdoors produces backpacks for a variety of purposes. Rocky Mountain's best-selling product is the Outbacker model. The following table summarizes the standard cost for the Outbacker.

Standard

Price

Standard Quantity

per Unit

Standard Cost

per Unit

A. Please complete the following:

During June, Rocky Mountain purchased and used direct materials costing $38,741.30, consisting of 2,210 square yards of material used in the production of 880 Outbacker backpacks.

Prepare the journal entry that Rocky Mountain Outdoors should record for the purchase of the direct materials, assuming they are purchased on account. Rocky mountain records direct materials price variances when materials are purchased.

Please complete the followings:

                             Journal

Post.

Ref.

B. Please complete the following:

Prepare the journal entry that Rock Mountain Outdoors should record for the use of the direct materials. Rocky Mountain records direct materials quantity variances as materials are entered into production.

                                   Journal

Post.

Ref.

Manufacturing Costs

Standard

Price

x

Standard Quantity

per Unit

=

Standard Cost

per Unit

Direct materials $18.05 per sq. yd. 2.2 sq. yd. $39.71 Direct labor $9.50 per hr. 2.0 hrs. 19.00 Factory overhead $5.05 per hr. 2.0 hrs 10.10 Total standard cost per backpack $68.81

Explanation / Answer

Rocky Mountain Outdoors Journal entries Direct Material Price Variance Description post .Ref Debit Credit June 22 Direct Materials Purchase $ 39,890.50 Direct Material price variance $   1,149.20 Accounts payable $ 38,741.30 Direct Material Quantity Variance Description post .Ref Debit Credit June 22 Work in process issue $ 34,944.80 Direct Material quantity variance $    4,945.70 Direct Material $ 39,890.50 workings per unit quantity( sq.yd) price ($ per sq.yd) Standard 2.2 18.05 Actual 2.51 17.53 Actual quntity 2210 Standard quantity 1936 (2.2 x 880) Material price variance Actaual quantity purchased x Actual price) - (Actual quantity purchased x standard price) = (2,210 sq.yd x 17.53) - (2210 x 18.05) = $ 38741.3- $ 39890.5 = $   1,149.20 Favorable Material quantity variance Actaual quantity purchased x Standard price) - (Standard quantity purchased x standard price) = (2,210 sq.yd x 18.05) - (1936 x 18.05) = $ 39890.5- $ 34944.8 = $   4,945.70 Unfavorable

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