Bechtel Technical Clothing produces parkas used by arctic explorers, mountain cl
ID: 2448213 • Letter: B
Question
Bechtel Technical Clothing produces parkas used by arctic explorers, mountain climbers, and people living in Minnesota. The company uses a standard costing system, and standards call for 2.5 yards of material at $55 per yard for each parka. The standard cost for labor is 3.5 hours at $35 per hour. Standard overhead is $14 per unit. For the year 2015, expected production is 8,000 parkas with fixed overhead of $58,000 and variable overhead of $6.3 per parka.
During 2015, 8,500 parkas were manufactured. The company purchased 24,300 yards of material at a cost of $1,409,400. Production required 22,300 yards of material. The cost of direct labor was $1,020,000 for 27,500 hours. Actual overhead for the year was $88,700. All purchases are on account.
Prepare a journal entry to record the purchase of material.
Prepare a journal entry to record material used in production.
Prepare a journal entry to record direct labor.
Prepare a journal entry to record actual overhead and overhead applied.
Prepare a journal entry to close the variances in requirements a through d to Cost of Goods Sold.
a.Prepare a journal entry to record the purchase of material.
Explanation / Answer
a. Prepare a journal entry to record the purchase of material.
Materials price variance = (Actual price - Standard Price) *Actual Quantity
Materials price variance = (1409400/24300 - 55)*24300
Materials price variance = $ 72900 Unfavorable
b. Prepare a journal entry to record material used in production.
Materials usage/quantity variance = (Actual Quantity Used- Standard Quantity)Standard Price
Materials usage/quantity variance = (22300 - 2.5*8500)*55
Materials usage/quantity variance = $ 57750 Unfavorable
c. Prepare a journal entry to record direct labor.
1) Labor rate variance = (Actual Rate-Standard Rate)*Actual Hour
Labor rate variance = (1020000/27500 - 35)*27500
Labor rate variance = $ 57500 Unfavorable
2) Labor efficiency variance = (Actual Hour-Standard Hour )Standard Rate
Labor efficiency variance = (27500 - 3.5*8500)*35
Labor efficiency variance =78750 favorable
d. Prepare a journal entry to record actual overhead and overhead applied.
Actual overhead = 88700
overhead applied. = 58000 + 6.3*8500
overhead applied. = 111550
e. Prepare a journal entry to close the variances in requirements a through d to Cost of Goods Sold.
Account Title Debit Credit Raw Material 1336500 Materials price variance 72900 Accounts Payable 1409400Related Questions
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