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Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402 Exercise 39
Direct Materials, Direct Labor, and Overhead Variances, Journal Entries
Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following standard cost sheet:
Algers computes its overhead rates using practical volume, which is 54,000 units. The actual results for the year are as follows:
a. Units produced: 53,000
b. Direct materials purchased: 274,000 pounds at $2.50 per pound
c. Direct materials used: 270,300 pounds
d. Direct labor: 40,100 hours at $17.95 per hour
e. Fixed overhead: $161,700
f. Variable overhead: $122,000
Required:
1. Compute price and usage variances for direct materials.
2. Compute the direct labor rate and labor efficiency variances.
3. Compute the fixed overhead spending and volume variances. Interpret the volume variance.
4. Compute the variable overhead spending and efficiency variances.
5. Prepare journal entries for the following:
a. The purchase of direct materials
b. The issuance of direct materials to production (Work in Process)
c. The addition of direct labor to Work in Process
d. The addition of overhead to Work in Process
e. The incurrence of actual overhead costs
f. Closing out of variances to Cost of Goods Sold
Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following standard cost sheet:
Algers computes its overhead rates using practical volume, which is 54,000 units. The actual results for the year are as follows:
a. Units produced: 53,000
b. Direct materials purchased: 274,000 pounds at $2.50 per pound
c. Direct materials used: 270,300 pounds
d. Direct labor: 40,100 hours at $17.95 per hour
e. Fixed overhead: $161,700
f. Variable overhead: $122,000
Required:
1. Compute price and usage variances for direct materials.
2. Compute the direct labor rate and labor efficiency variances.
3. Compute the fixed overhead spending and volume variances. Interpret the volume variance.
4. Compute the variable overhead spending and efficiency variances.
5. Prepare journal entries for the following:
a. The purchase of direct materials
b. The issuance of direct materials to production (Work in Process)
c. The addition of direct labor to Work in Process
d. The addition of overhead to Work in Process
e. The incurrence of actual overhead costs
f. Closing out of variances to Cost of Goods Sold
Explanation
Verified
Verified
Material Price variance
Material price ...
Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
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