Apollo Sports manufacturers fabric tents. the poles ate purchased from a vendor,

Question

Apollo Sports manufacturers fabric tents. the poles ate purchased from a vendor, so the only part manufactured is the actual fabric tent. The company uses a standard cost system based on manufacturing 5,000 tents per month. Overhead is applied on a per-unit basis. In May, 4, 840 tents were produced. Management has a policy that all variances greater than 3% from standard should be investigated. Standard and actual costs are listed below: Compute the total, price, and quantity variances for both materials and labor. State if each variance Is favorable or unfavorable. Compute the total, volume, and budget overhead variances. State if favor able or unfavorable. Prepare Journal entries for the application of overhead, the actual overhead, and to record variances and dose the overhead account. Note that on the actual overhead, you will not have individual expense account amount, so just list "various" for the expense accounts. Always label all of your work.

Explanation / Answer

Material Price Variance = Actual Quantity (Standard Price - Actual Price)

= 86550 (3.20 - 3.25)

= 4,327.5 (U)

Material Quantity Variance = Standard Rate (Standard Quantity - Actual Quantity)

= 3.20 (87120 - 86550)

= 1824 (F)

Direct Labour Rate Variance = Actual direct labour hour (Standard Rate - Actual Rate)

= 32,100 (16 - 15.80)

= 6420 (F)

Direct Labour Efficiency Variance = Standard Rate (Standard Hour - Actual Hour)

= 16 (31,460 - 32,100)

= 10,240 (U)

Overhead Spending Variance = Actual Quantity (Standard Rate - Actual Rate)

= 4840 (12) - 56,750

= 1330 (F)

Journal Entry

1. Recording Material Variance

Direct Material

276,960

Direct Material Price Variance

4,327.50

Accounts Payable

281,287.50

Work in process

278,784

Direct Material Quantity Variance

1824

Direct Material

276,960

2. Recording Labour Variance

Work in process

503,360

Direct Labour Efficiency Variance

10,240

Direct Labour Rate Variance

6,420

Wages Payable

507,180

3. Recording Overhead Variance

Work in process

58,080

Overhead Spending Varinace

1,330

Overhead Payable

56,750

Direct Material

276,960

Direct Material Price Variance

4,327.50

Accounts Payable

281,287.50

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