Variances and Journal Entries Kent Company manufactures a single product and use

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Variances and Journal Entries
Kent Company manufactures a single product and uses a standard costing system. The nature of its product dictates that it be sold in the period it is produced. Thus, no ending work in process or finished goods inventories remain at the end of the period. However, raw materials can be stored and are purchased in bulk when prices are favorable. Per-unit, standard product costs are material, $6.40 (0.5 pound); labor, $15.40 (1.5 hours); and variable overhead, $3.40 (based on direct labor hours). Budgeted fixed overhead is $96,000. Kent Company accounts for all inventories and cost of goods sold at standard cost and records each variance in a separate account. The following data relate to June, 2016 when 7,800 finished units were produced.

a. Assume Kent purchased 4,500 pounds of raw materials on account at $12.00 per pound and used 4,200 pounds in June's production, prepare a journal entry to record the purchase of raw materials and a separate journal entry to record the use of raw materials in production. Record these entries using standard costs and include the appropriate materials variances.

b. Assuming Kent's employees worked 12,000 direct labor hours at an average hourly rate of $10.90, prepare a journal entry to record actual costs, standard costs, and any labor variances.

c. Assuming Kent's actual and applied variable overhead was $26,100 and that budgeted and actual fixed overhead incurred was $96,000, prepare a journal entry to record actual and standard overhead costs and any overhead variances.

To record actual and standard overhead costs

General Journal Description Debit Credit AnswerAccounts payableLabor efficiency varianceMaterials efficiency varianceMaterials inventoryVariable overhead efficiency varianceVariable overhead spending varianceWages payable Answer Answer Materials price variance Answer Answer AnswerAccounts payableLabor efficiency varianceLabor rate varianceMaterials efficiency varianceMaterials inventoryVariable overhead efficiency varianceVariable overhead spending varianceWages payable Answer Answer To record the purchase of direct materials Work in process inventory Answer Answer AnswerAccounts payableLabor efficiency varianceLabor rate varianceMaterials efficiency varianceMaterials inventoryVariable overhead efficiency varianceWork in process inventory Answer Answer AnswerAccounts payableLabor efficiency varianceLabor rate varianceMaterials efficiency varianceMaterials inventoryVariable overhead efficiency varianceVariable overhead spending varianceWages payable Answer Answer To record the use of direct materials Variances and Journal Entries Kent Company manufactures a single product and uses a standard costing system. The nature of its product dictates that it be sold in the period it is produced. Thus, no ending work in process or finished goods inventories remain at the end of the period. However, raw materials can be stored and are purchased in bulk when prices are favorable. Per-unit, standard product costs are material, $6.40 .S pound labor, $15.40 (1.5 hours and variable overhead, $3.40(based on direct labor hours). Budgeted fixed overhcad is 96,000. Kent Company accounts for all inventories and cost of goods sold at standard cost and records each variance in?separate account. The following data relate to june, 2016 when 7,800 finished units were produced. a. Assume Kent purchased 4,500 pounds of raw materials on account at $12.00 per pound and used 4200 pcunds in June's production, prepare a journal entry to record the purchase of raw materials and a separate journal entry to record the use of raw materials in production. Record these envtries using standard costs and indude the appropriate materials variances General Journal Debit Credit Materials price variance To record the purchase of direct materials Nork in process inventory To record the use of direct materials b. Assuming Kent's employees worked 12,000 direct labor hours at an average hourly rate of $10.90, prepare a journal entry to record actual costs, standard costs, and any labor variances General Journal Description Debit Credit Work in process inventory To record direct labor costs c. Assuming Kent's actual and applied variable averhead was $26,100 and that budgeted and actual foxed overhead incurred was $96,000, prepare a journal entry to record actual and standard overhead costs and any overhead variances. General Journal Debit Credit Work in process inventory Manufacturing overhead To record actual and standard overhead costs

Explanation / Answer

a) Standard Rate for Materials = $6.4 per unit/0.50 pounds per unit = $12.80 per pound

General Journal (Amounts in $)

b) Standard Labor rate per hour = Labor cost per unit/Standard Hour per unit

= $15.40/1.50 hrs = $10.26667 per hour

General Journal (Amounts in $)

c) Variable overhead rate per hour = $3.40/1.50 hr = $2.26667 per hour

Actual Variable Overhead rate per hour = $26,100/12,000 hrs = $2.175

Standard Labor hours = 7,800 units*1.50 hr = 11,700 hrs

General Journal (Amounts in $)

Description Debit Credit Materials Inventory (4,500 pounds*$12.80 per pound) 57,600 Materials Price Variance ($57,600-$54,000) 3,600 Accounts Payable (4,500 pounds*$12 per pound) 54,000 (To record the purchase of direct materials) Work in process inventory (7,800 units*0.50 pounds*$12.80) 49,920 Materials Efficiency Variance ($53,760-$49,920) 3,840 Materials Inventory (4,200 pounds*$12.80) 53,760 (To record the use of direct materials)

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