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Unformatted text preview: 57/5414 Aspen Products, Inc., began production of a new product on April 1. The company uses a standard
cost system and has established the following standards for one unit of the new product: During April, the following activity was recorded regarding the new product:
a. Purchased 7,000 feet of material at a cost of $5.75 per foot. b. Used 6,000 feet of material to produce 1,500 units of the new product.
c. Worked 725 direct laborhours on the new product at a cost of $8,120. 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 pro
duction.
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.
3. Post the entries you have prepared to the T—accounts below: PawMaterials ' Accounts Payable
40,250
Materials Price Variance ' Wages Payable
8,120
Materials Quantity Variance Labor Rate variance
Work in Process Labor Efficiency Variance Materials used ' ?
Labor cost ? EYIE—Q/i(¢dvtg 1. a.
ti of Actual uantity of Standard Quantity
Adufripgltsaratty ‘ Intgts, at Allowed for Output,
Actual Price Standard Price at Standard Price
(AQ x AP) (AQ X SP) (SQ x SP)
7,000 feet x 7,000 feet x 5,250 feet* x
$5.75 per foot $6.00 per foot $6.00 per foot
= $40,250 = $42,000 = $31,500 Price Variance,
$1 750 F 6,000 feet x $6.00 per foot
= $36,000 Quantity Variance, $4 500 U
*1,500 units x 3.5 feetper unit = 5,250 feet Alternatively: Materials Price Variance = AQ (AP — SP)
7,000 feet ($5.75 per foot — $6.00 per foot) = $1,750 F Materials Quantity Variance = SP (AQ — SQ)
$6.00 per foot (6,000 feet — 5,250 feet) = $4,500 U b. The journal entries would be: Raw Materials (7,000 feet x $6 per foot) ............. 42,000
Materials Price Variance ' b. The journal entry would be: Work in Process (600 hours x $10 per hour) ........... 6,000
Labor Rate Variance (725 hours x $1.20 U per hour) .......................... 870
Labor Efficiency Variance (125 U hours x $10 per hour) ............................. 1,250 Wages Payable (725 hours x $11.20 per hour) .. 8,120 3. The entries are: (a) purchase of materials; (b) issue of materials to pro
ducu'on; and (c) incurrenoe of direct labor cost. Raw Materials Accounts Pagble
(a) 42,000 (b) 36,000 (a) 40,250
Bal. 6,000I _
Materials Price Variance Wages Payable
(a) 1,750 i (c) 8,120 Materials Quantity Variance Labor Rate Variance (b) 4,500 (c) 870 ‘
Work in Process Labor Efﬁciency Variance (b) 31,500  (c) 1,250 ‘
(c) 6,0003 11,000 feet of material at a standard cost of $6.00 per foot
2Materials used
3Labor cost (7,000 feet x $0.25 F per foot) .................... 1,750
Accounts Payable
(7,000 feet x $5.75 per f00t) ...................... 40,250
Work in Process (5,250 feet x $6 per foot) .......... 31,500
Materials Quantity Variance
(750 feet U x $6 per foot) ............................... 4,500
Raw Materials (6,000 feet x $6 per foot) ........ 36,000 2. a.
Actual Hours of
Input, at the Actual Hours of
Input, at the Standard Hours Actual Rate Standard Rate at the Standard Rate
(AH x AR) (AH x SR) (SH x SR)
$8,120 725 hours x 600 hours* x
$10 per hour $10 per hour
= $7,250 = $6,000
T Rate Variance, Efficiency Variance, Total Variance, $2,120 U *1,500 units x 0.4 heur per unit = 600 hours Alternatively: Labor Rate Variance = AH (AR — SR)
725 hours ($11.20 per hour* — $10.00 per hour) = $870 U *$8,120 + 725'hours = $11.20 per hour
Labor Efficiency Variance = SR (AH — SH)
$10 per hour (725 hours — 600 hours) = $1,250 U Allowed for Output, ...
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 Spring '08
 Larkin,R

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