Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of produc

Question

Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller.

  

  

Actual material purchases amounted to 240,000 kilograms at $.81 per kilogram. Actual costs incurred in the production of 50,000 units were as follows:

Exercise 10-31

Required:

Prepare the following journal entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

1) Record the purchase of direct material on account and the direct-material purchase price variance.

2) Record the addition of direct-material cost to work-in-process inventory and the direct-material quantity variance.

3) Record the addition of direct-labor cost to work-in-process inventory and the direct-labor variances.

4) Record the closing of the direct-material and direct-labor variances to cost of goods sold.

Direct Labor: Direct Material: Quantity, 0.25 hour Quantity, 4 kilograms Rate, $16 per hour Price, $0.80 per kilogram

Explanation / Answer

Solution:

Journal Entries S. No. Particulars Debit Credit 1 Raw Material inventory Dr (240000*$0.80) $192,000.00 Direct material price variance Dr (240000*$0.01) $2,400.00                  To Cash (240000*$0.81) $194,400.00 (Being raw material purchased) 2 Work in Process Dr (50000*4*$0.80) $160,000.00 Direct material quantity variance Dr (10000*$0.80) $8,000.00                  To Raw Material inventory (210000*$0.80) $168,000.00 (To recored consumption of raw material in to production) 3.1 Factory Wages Dr (13000*$16) $208,000.00 Direct labor rate variance Dr (13000*$0.30) $3,900.00                  To Cash (13000*$16.30) $211,900.00 (Being labor cost incurred) 3.2 Work in Process Dr (50000*0.25*$16) $200,000.00 Direct labor efficiency variance Dr (500*$16) $8,000.00                  To Factory Wages (13000*$16) $208,000.00 (To direct labor used in production) 4 Cost of goods sold Dr $22,300.00                  To Direct material price variance $2,400.00                  To Direct material quantity variance $8,000.00                  To Direct labor rate variance $3,900.00                  To Direct labor efficiency variance $8,000.00 (Being direct material and direct labor variances closed to cost of goods sold)

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