Bechtel Technical Clothing produces parkas used by arctic explorers, mountain cl

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 $54 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 7,500 parkas with fixed overhead of $62,000 and variable overhead of $6.2 per parka.

During 2015, 8,500 parkas were manufactured. The company purchased 24,000 yards of material at a cost of $1,368,000. Production required 22,300 yards of material. The cost of direct labor was $1,030,000 for 28,000 hours. Actual overhead for the year was $91,300. All purchases are on account.

(To record the use of raw material)

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 $54 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 7,500 parkas with fixed overhead of $62,000 and variable overhead of $6.2 per parka.

During 2015, 8,500 parkas were manufactured. The company purchased 24,000 yards of material at a cost of $1,368,000. Production required 22,300 yards of material. The cost of direct labor was $1,030,000 for 28,000 hours. Actual overhead for the year was $91,300. All purchases are on account.

Explanation / Answer

Journal Entries:

S.No. Particulars Debit Credit a. Raw Material Inventory 1444200           Accounts Payable 1444200 b. Work in progess(1444200/24900*22200) 1287600         Raw Material Inventory 1287600 c. Overhead Cost Pool 1040000         Wage Expense 1040000 d. Cost of Goods Sold 92700        Overhead Cost Pool 92700 e. Overhead efficiency Variance[(8200-8500)*6.1] 1830 Overhead expenditure variance[(6.1-10.905)*8500] 40850 Labor Rate Variance[(35-37.276)*27900] 63500 Material Usage Variance [(21250-22200)*54] 51300 Material Price Variance[(54-58)*24900] 99600       Labor usage variance [(29750-27900)*35] 64750       Cost of Goods Sold

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