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Managerial Accounting: The Cornerstone of Business Decision-Making
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Chapter 10 / Exercise 6
Managerial Accounting: The Cornerstone of Business Decision-Making
Hansen/Mowen
Expert Verified
(Click the icon to view the standards.)For August 2014, Dunnhad the following costs and variances for actual production of 2 comma 000chairs, 3 comma 700square yards of input purchased and used:LOADING...(Click the icon to view the costs and variances for actual production "option 1".)The following variances are under the assumption that 6 comma 000square yards of materials were purchased, even though only 3 comma 700square yards were used. Suppose further that direct materials price variances are isolated and traced at the time of purchase to the purchasing department rather than to the production department.LOADING...(Click the icon to view the costs and variances under the assumptions "option 2".)RequirementPrepare journal entries and post them to T-accounts for the price and efficiency variances listed under the two options. Summarize how these journal entries differ from normal-costing entries. Standards per chairDirect materials2 square yards of input at$5.00per square yardDirect manufacturing labor0.5 hour of input at$10.00 per hourOption1: Actual productionActual inputxFlexibleActual costsBudgeted pricebudget costsDirect materials$18,870$18,500$20,000Direct manufacturing labor8,8209,00010,000
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Managerial Accounting: The Cornerstone of Business Decision-Making
The document you are viewing contains questions related to this textbook.
Chapter 10 / Exercise 6
Managerial Accounting: The Cornerstone of Business Decision-Making
Hansen/Mowen
Expert Verified
PriceEfficiencyvariancesvariancesDirect materials$370U$1,500FDirect manufacturing labor180F1,000FOption2: Increase in purchasesActual inputxFlexibleDirect materials:Actual costsBudgeted pricebudget costsPurchasing$30,600$30,000Production$18,500$20,000PriceEfficiencyvariancevarianceDirect materials$600U$1,500FANSWERSOption 1.Prepare the journal entry for the direct materials price variance. (Record debits first, then credits. Exclude explanations from any journal entries.)Journal EntryDateAccountsDebitCredit1. (a)Direct Materials Control18,500Direct Materials Price Variance370Accounts Payable Control18,870Now prepare the journal entry for direct materials efficiency variance.Journal EntryDateAccountsDebitCredit1. (b)Work-in-Process Control20,000Direct Materials Efficiency Variance1,500Direct Materials Control18,500Next, prepare the journal entry for direct manufacturing labor price and efficiency variances.Journal EntryDateAccountsDebitCredit1. (c)Work-in-Process Control10,000Direct Manufacturing Labor Price Variance180Direct Manufacturing Labor Efficiency Variance1,000Wages Payable Control8,820
Post the journal entries you prepared to the following T-accounts. (Abbreviation used: Mfg.=Manufacturing)Direct Materials ControlDirect Materials Price VarianceDirect Materials EfficiencyVariance1. (a)18,500 1. (b)18,500 1. (a)3701. (b)1,500Work-in-Process ControlDirect Mfg. Labor PriceVarianceDirect Mfg. Labor EfficiencyVariance1. (b)20,0001. (c)10,0001. (c)180 1. (c)1,000Wages Payable ControlAccounts Payable Control1. (c)8,820 1. (a)18,870 Option 2.Prepare the journal entry for the direct materials price variance. (Record debits first, then credits. Exclude explanations from any journal entries.)Journal EntryDateAccountsDebitCredit2. (a)Direct Materials Control30,000Direct Materials Price Variance600Accounts Payable Control30,600Now prepare the journal entry for direct materials efficiency variance.

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