Basic Variance Analysis, Revision of Standards, Journal EntriesPetrillo Company produces engine parts for large motors. The company uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products (a valve) is as follows:Direct materials (7 lbs. @ $5.40)$37.80Direct labor (1.75 hrs. @ $18)31.50Variable overhead (1.75 hrs. @ $4.00)7.00Fixed overhead (1.75 hrs. @ $3.00)5.25 Standard cost per unit$81.55During the year, Petrillo had the following activity related to valve production:Production of valves totaled 20,600 units.A total of 135,600 pounds of direct materials was purchased at $5.36 per pound.There were 10,000 pounds of direct materials in beginning inventory (carried at $5.40 per pound). There was no ending inventory.The company used 36,500 direct labor hours at a total cost of $656,270.Actual fixed overhead totaled $110,000.Actual variable overhead totaled $170,000.Petrillo produces all of its valves in a single plant. Normal activity is 20,000 units per year. Standard overhead rates are computed based on normal activity measured in standard direct labor hours.Required:1. Compute the direct materials price and usage variances.MPV$fill in the blank e86a63fb5fdd051_1 MUV$fill in the blank e86a63fb5fdd051_3 2. Compute the direct labor rate and efficiency variances.Labor Rate Variance$fill in the blank e86a63fb5fdd051_5 Labor Efficiency Variance$fill in the blank e86a63fb5fdd051_7 3. Compute overhead variances using a two-variance analysis.Budget Variance$fill in the blank e86a63fb5fdd051_9 Volume Variance$fill in the blank e86a63fb5fdd051_11 4. Compute overhead variances using a four-variance analysis.Variable overhead spending variance$fill in the blank e86a63fb5fdd051_13 Variable overhead efficiency variance$fill in the blank e86a63fb5fdd051_15 Fixed overhead spending variance$fill in the blank e86a63fb5fdd051_17 Fixed overhead volume variance$fill in the blank e86a63fb5fdd051_19 5. Assume that the purchasing agent for the valve plant purchased a lower-quality direct material from a new supplier. Would you recommend that the company continue to use this cheaper direct material? 6. Prepare all possible journal entries (assuming a four-variance analysis of overhead variances). For compound entries, if an amount box does not require an entry, leave it blank.a.Record materials purchase fill in the blank ceb2a3009fe6f8a_2fill in the blank ceb2a3009fe6f8a_3 fill in the blank ceb2a3009fe6f8a_5fill in the blank ceb2a3009fe6f8a_6 fill in the blank ceb2a3009fe6f8a_8fill in the blank ceb2a3009fe6f8a_9b.Record materials usage fill in the blank ceb2a3009fe6f8a_11fill in the blank ceb2a3009fe6f8a_12 fill in the blank ceb2a3009fe6f8a_14fill in the blank ceb2a3009fe6f8a_15 fill in the blank ceb2a3009fe6f8a_17fill in the blank ceb2a3009fe6f8a_18c.Record direct labor fill in the blank ceb2a3009fe6f8a_20fill in the blank ceb2a3009fe6f8a_21 fill in the blank ceb2a3009fe6f8a_23fill in the blank ceb2a3009fe6f8a_24 fill in the blank ceb2a3009fe6f8a_26fill in the blank ceb2a3009fe6f8a_27 fill in the blank ceb2a3009fe6f8a_29fill in the blank ceb2a3009fe6f8a_30d.Close materials usage and labor variances to CGS fill in the blank ceb2a3009fe6f8a_32fill in the blank ceb2a3009fe6f8a_33 fill in the blank ceb2a3009fe6f8a_35fill in the blank ceb2a3009fe6f8a_36 fill in the blank ceb2a3009fe6f8a_38fill in the blank ceb2a3009fe6f8a_39 fill in the blank ceb2a3009fe6f8a_41fill in the blank ceb2a3009fe6f8a_42e.Close price variance to CGS fill in the blank ceb2a3009fe6f8a_44 fill in the blank ceb2a3009fe6f8a_46f.Record actual variable overhead fill in the blank ceb2a3009fe6f8a_48 fill in the blank ceb2a3009fe6f8a_50g.Record actual fixed overhead fill in the blank ceb2a3009fe6f8a_52 fill in the blank ceb2a3009fe6f8a_54h.Apply variable overhead fill in the blank ceb2a3009fe6f8a_56 fill in the blank ceb2a3009fe6f8a_58i.Apply fixed overhead fill in the blank ceb2a3009fe6f8a_60 fill in the blank ceb2a3009fe6f8a_62j.Record overhead variances fill in the blank ceb2a3009fe6f8a_64fill in the blank ceb2a3009fe6f8a_65 fill in the blank ceb2a3009fe6f8a_67fill in the blank ceb2a3009fe6f8a_68 fill in the blank ceb2a3009fe6f8a_70fill in the blank ceb2a3009fe6f8a_71 fill in the blank ceb2a3009fe6f8a_73fill in the blank ceb2a3009fe6f8a_74 fill in the blank ceb2a3009fe6f8a_76fill in the blank ceb2a3009fe6f8a_77 fill in the blank ceb2a3009fe6f8a_79fill in the blank ceb2a3009fe6f8a_80k.Close spending and efficiency variances to CGS fill in the blank ceb2a3009fe6f8a_82fill in the blank ceb2a3009fe6f8a_83 fill in the blank ceb2a3009fe6f8a_85fill in the blank ceb2a3009fe6f8a_86 fill in the blank ceb2a3009fe6f8a_88fill in the blank ceb2a3009fe6f8a_89 fill in the blank ceb2a3009fe6f8a_91fill in the blank ceb2a3009fe6f8a_92l.Close volume variance to CGS fill in the blank ceb2a3009fe6f8a_94 fill in the blank ceb2a3009fe6f8a_96

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Description: Basic Variance Analysis, Revision of Standards, Journal EntriesPetrillo Company produces engine parts for large motors. The company uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume p

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Basic Variance Analysis, Revision of Standards, Journal Entries Petrillo Company produces engine parts for large motors. The company uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products (a valve) is as follows: Direct materials (7 lbs. @ $5.40) $37.80 Direct labor (1.75 hrs. @ $18) 31.50 Variable overhead (1.75 hrs. @ $4.00) 7.00 Fixed overhead (1.75 hrs. @ $3.00) 5.25 Standard cost per unit $81.55 During the year, Petrillo had the following activity related to valve production: Production of valves totaled 20,600 units. A total of 135,600 pounds of direct materials was purchased at $5.36 per pound. There were 10,000 pounds of direct materials in beginning inventory (carried at $5.40 per pound). There was no ending inventory. The company used 36,500 direct labor hours at a total cost of $656,270. Actual fixed overhead totaled $110,000. Actual variable overhead totaled $170,000. Petrillo produces all of its valves in a single plant. Normal activity is 20,000 units per year. Standard overhead rates are computed based on normal activity measured in standard direct labor hours. Required: 1. Compute the direct materials price and usage variances. MPV $fill in the blank e86a63fb5fdd051_1 MUV $fill in the blank e86a63fb5fdd051_3 2. Compute the direct labor rate and efficiency variances. Labor Rate Variance $fill in the blank e86a63fb5fdd051_5 Labor Efficiency Variance $fill in the blank e86a63fb5fdd051_7 3. Compute overhead variances using a two-variance analysis. Budget Variance $fill in the blank e86a63fb5fdd051_9 Volume Variance $fill in the blank e86a63fb5fdd051_11

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Basic Variance Analysis, Revision of Standards, Journal Entries

Petrillo Company produces engine parts for large motors. The company uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products (a valve) is as follows:

Direct materials (7 lbs. @ $5.40)	$37.80
Direct labor (1.75 hrs. @ $18)	31.50
Variable overhead (1.75 hrs. @ $4.00)	7.00
Fixed overhead (1.75 hrs. @ $3.00)	5.25
Standard cost per unit	$81.55

During the year, Petrillo had the following activity related to valve production:

Production of valves totaled 20,600 units.
A total of 135,600 pounds of direct materials was purchased at $5.36 per pound.
There were 10,000 pounds of direct materials in beginning inventory (carried at $5.40 per pound). There was no ending inventory.
The company used 36,500 direct labor hours at a total cost of $656,270.
Actual fixed overhead totaled $110,000.
Actual variable overhead totaled $170,000.

Petrillo produces all of its valves in a single plant. Normal activity is 20,000 units per year. Standard overhead rates are computed based on normal activity measured in standard direct labor hours.

Required:

1. Compute the direct materials price and usage variances.

MPV	$fill in the blank e86a63fb5fdd051_1
MUV	$fill in the blank e86a63fb5fdd051_3

2. Compute the direct labor rate and efficiency variances.

Labor Rate Variance	$fill in the blank e86a63fb5fdd051_5
Labor Efficiency Variance	$fill in the blank e86a63fb5fdd051_7

3. Compute overhead variances using a two-variance analysis.

Budget Variance	$fill in the blank e86a63fb5fdd051_9
Volume Variance	$fill in the blank e86a63fb5fdd051_11

4. Compute overhead variances using a four-variance analysis.

Variable overhead spending variance	$fill in the blank e86a63fb5fdd051_13
Variable overhead efficiency variance	$fill in the blank e86a63fb5fdd051_15
Fixed overhead spending variance	$fill in the blank e86a63fb5fdd051_17
Fixed overhead volume variance	$fill in the blank e86a63fb5fdd051_19

5. Assume that the purchasing agent for the valve plant purchased a lower-quality direct material from a new supplier. Would you recommend that the company continue to use this cheaper direct material?

6. Prepare all possible journal entries (assuming a four-variance analysis of overhead variances). For compound entries, if an amount box does not require an entry, leave it blank.

a.	Record materials purchase
		fill in the blank ceb2a3009fe6f8a_2	fill in the blank ceb2a3009fe6f8a_3
		fill in the blank ceb2a3009fe6f8a_5	fill in the blank ceb2a3009fe6f8a_6
		fill in the blank ceb2a3009fe6f8a_8	fill in the blank ceb2a3009fe6f8a_9
b.	Record materials usage
		fill in the blank ceb2a3009fe6f8a_11	fill in the blank ceb2a3009fe6f8a_12
		fill in the blank ceb2a3009fe6f8a_14	fill in the blank ceb2a3009fe6f8a_15
		fill in the blank ceb2a3009fe6f8a_17	fill in the blank ceb2a3009fe6f8a_18
c.	Record direct labor
		fill in the blank ceb2a3009fe6f8a_20	fill in the blank ceb2a3009fe6f8a_21
		fill in the blank ceb2a3009fe6f8a_23	fill in the blank ceb2a3009fe6f8a_24
		fill in the blank ceb2a3009fe6f8a_26	fill in the blank ceb2a3009fe6f8a_27
		fill in the blank ceb2a3009fe6f8a_29	fill in the blank ceb2a3009fe6f8a_30
d.	Close materials usage and labor variances to CGS
		fill in the blank ceb2a3009fe6f8a_32	fill in the blank ceb2a3009fe6f8a_33
		fill in the blank ceb2a3009fe6f8a_35	fill in the blank ceb2a3009fe6f8a_36
		fill in the blank ceb2a3009fe6f8a_38	fill in the blank ceb2a3009fe6f8a_39
		fill in the blank ceb2a3009fe6f8a_41	fill in the blank ceb2a3009fe6f8a_42
e.	Close price variance to CGS
		fill in the blank ceb2a3009fe6f8a_44
			fill in the blank ceb2a3009fe6f8a_46
f.	Record actual variable overhead
		fill in the blank ceb2a3009fe6f8a_48
			fill in the blank ceb2a3009fe6f8a_50
g.	Record actual fixed overhead
		fill in the blank ceb2a3009fe6f8a_52
			fill in the blank ceb2a3009fe6f8a_54
h.	Apply variable overhead
		fill in the blank ceb2a3009fe6f8a_56
			fill in the blank ceb2a3009fe6f8a_58
i.	Apply fixed overhead
		fill in the blank ceb2a3009fe6f8a_60
			fill in the blank ceb2a3009fe6f8a_62
j.	Record overhead variances
		fill in the blank ceb2a3009fe6f8a_64	fill in the blank ceb2a3009fe6f8a_65
		fill in the blank ceb2a3009fe6f8a_67	fill in the blank ceb2a3009fe6f8a_68
		fill in the blank ceb2a3009fe6f8a_70	fill in the blank ceb2a3009fe6f8a_71
		fill in the blank ceb2a3009fe6f8a_73	fill in the blank ceb2a3009fe6f8a_74
		fill in the blank ceb2a3009fe6f8a_76	fill in the blank ceb2a3009fe6f8a_77
		fill in the blank ceb2a3009fe6f8a_79	fill in the blank ceb2a3009fe6f8a_80
k.	Close spending and efficiency variances to CGS
		fill in the blank ceb2a3009fe6f8a_82	fill in the blank ceb2a3009fe6f8a_83
		fill in the blank ceb2a3009fe6f8a_85	fill in the blank ceb2a3009fe6f8a_86
		fill in the blank ceb2a3009fe6f8a_88	fill in the blank ceb2a3009fe6f8a_89
		fill in the blank ceb2a3009fe6f8a_91	fill in the blank ceb2a3009fe6f8a_92
l.	Close volume variance to CGS
		fill in the blank ceb2a3009fe6f8a_94
			fill in the blank ceb2a3009fe6f8a_96

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