Bechtel Technical Clothing produces parkas used by arctic explorers, mountain cl
ID: 2472325 • 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 $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 7,400 parkas with fixed overhead of $51,000 and variable overhead of $6.1 per parka.
During 2015, 8,500 parkas were manufactured. The company purchased 22,300 yards of material at a cost of $1,293,400. Production required 22,400 yards of material. The cost of direct labor was $1,000,000 for 27,900 hours. Actual overhead for the year was $86,500. All purchases are on account.
(a)
Account Titles and Explanation
Debit
Credit
b. Prepare a journal entry to record material used in production
c. Prepare a journal entry to record direct labor.
d. Prepare a journal entry to record actual overhead and overhead applied.
e. Prepare a journal entry to close the variances in requirements a through d to Cost of Goods Sold.
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 7,400 parkas with fixed overhead of $51,000 and variable overhead of $6.1 per parka.
During 2015, 8,500 parkas were manufactured. The company purchased 22,300 yards of material at a cost of $1,293,400. Production required 22,400 yards of material. The cost of direct labor was $1,000,000 for 27,900 hours. Actual overhead for the year was $86,500. All purchases are on account.
Explanation / Answer
Dr. Material Inventory 1,293,400
Cr Accounts Payable 1,293,400
Dr. Work in Process 1,299,200
Cr. Direct material 1,299,200
Dr. Work in Process 1,000,000
Cr. Direct labor 1,000,000
Dr. Work in Process 102,850
Cr. Factory Overhead 102,850
Dr. Factory overhead 16,350
Cr. Cost of goods sold 16,350
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