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 412,800 kilograms at $0.70 per kilogram. Actual costs incurred in the production of 48,000 units were as follows:

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, 0.29 hour Quantity, 8 kilograms Rate, $14.50 per hour Price, $0.68 per kilogram

Explanation / Answer

1)Purchase price variance =AQ purchased [AR-SR]

       = 412800[.70-.68]

       = 8256 U

2)Direct material quantity variance =SR[AQ used -SQ]

            = .68[391200- (48000*8)].

             = .68 [391200- 384000]

            = 4896 U

3)Labor rate variance =AH[AR-SR]

      = 228096-[15360*14.50]

      = 228096 - 222720

       = 5376 U

Labor efficiency variance =SR[AH-SH]

        = 14.5[15360-(48000*.29)]

        = 14.5 [ 15360- 13920]

         = 20880 U

4)

Account title Debit credit Raw material Inventory [412800*.68] 280704 Material purchase price variance 8256 Accounts payable [412800*.70] 288960

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