Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 69

Standard Cost in Process Costing; All Variances and Journal Entries Dash Company adopted a standard costing system several years ago. The standard costs for the prime costs (i.e., direct materials + direct labor) of its single product are

Material	(8 kilograms x $5.00/kg)	$ 40.00
Labor	(6 hours x $18.20/hr.)	$109.20

All materials are added at the beginning of processing. The following data were taken from the company’s records for November:

In-process beginning inventory	none
In-process ending inventory	800	Units, 75 percent complete as to labor
Units completed	5,600	Units
Budgeted output	6,000	Units
Purchases of materials	50,000	Kilograms
Total actual labor costs	$600,000
Actual hours of labor	36,500	Hours
Materials usage variance	$1,500	Unfavorable
Total materials variance	$750	Unfavorable

Required

1. Compute for November:

?a. The labor efficiency variance.

?b. The labor rate variance.

?c. The actual number of kilograms of material used in the production process during the month.

?d. The actual price paid per kilogram of material during the month.

?e. The total amounts of material and labor cost transferred to the finished goods account.

?f. The total amount of material and labor cost in the work-in-process inventory account at the end of November.

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2. Prepare journal entries to record all transactions including the variances in requirement 1.

Step 1 of 5

Variance and budget v/s variance:

In costing, variance is a difference occurred between planned, standard or budgeted cost and the actual cost incurred. These variances can be for both cost and revenue. These variances can be favourable or unfavourable.