Final Exam Problem 2: Variance Analysis and Journal Entries Genola Fashions bega
ID: 2483796 • Letter: F
Question
Final Exam Problem 2: Variance Analysis and Journal Entries Genola Fashions began production of a new product on June 1. The company uses a standard cost system and has established the following standards for one unit of new product: Standard Quantity Standard Price Standard or Hours or Rate Cost Direct Materials 2.5 yards $14 per yard $35.00 Direct Labor 1.6 hours $8 per hour 12.80 During June, the following activity was recorded regarding the new product: a. Purchasing acquired 10,000 yards of material at a cost of $13.80 per yard. b. Production used 8,000 yards of material to manufacture 3,000 units of new product. c. Production reported that 5,000 direct labor-hours were worked on the new product as a cost of $43,000. Required: 1. For direct materials: a. Compute the direct materials price and quantity variances b. Prepare journal entries to record the purchase of materials and the use of materials in production. 2. For direct labor: a. Compute the direct labor rate and efficiency variances. b. Prepare journal entries to record the incurrence of direct labor cost for the month. Final Exam Problem 2: Variance Analysis and Journal Entries Genola Fashions began production of a new product on June 1. The company uses a standard cost system and has established the following standards for one unit of new product: Standard Quantity Standard Price Standard or Hours or Rate Cost Direct Materials 2.5 yards $14 per yard $35.00 Direct Labor 1.6 hours $8 per hour 12.80 During June, the following activity was recorded regarding the new product: a. Purchasing acquired 10,000 yards of material at a cost of $13.80 per yard. b. Production used 8,000 yards of material to manufacture 3,000 units of new product. c. Production reported that 5,000 direct labor-hours were worked on the new product as a cost of $43,000. Required: 1. For direct materials: a. Compute the direct materials price and quantity variances b. Prepare journal entries to record the purchase of materials and the use of materials in production. 2. For direct labor: a. Compute the direct labor rate and efficiency variances. b. Prepare journal entries to record the incurrence of direct labor cost for the month.Explanation / Answer
1)Direct material price variance = AQ [AR-SR]
= 8000 [ 13.8 - 14 ]
= 8000 * - .2
= - 1600 F
Material quantity variance = SR [AQ-SQ]
= 14 [8000- (2.5*3000)]
= 14 [8000 - 7500]
=7000 U
2)Labor rate variance = AH [AR-SR[
= 43000 - [5000*8]
43000 - 40000
= 3000 U
Labor efficiency variance = SR [AH -SH]
=8 [ 5000 - (3000* 1.6)]
= 8 [5000- 4800]
= 1600 U
ENteries:
Case Account debit credit a Work in process [3000*14*2.5] 105000 Maerial quantity variance 7000 Material price variance 1600 Raw materiaL inventory [8000*13.8] 110400 [material used iin production] b Work in process [3000*1.6*8] 38400 Labor rate variance 3000 Labor efficiency variance 1600 Wages payable 43000Related Questions
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