In all of the exercises involving variances, use “F” and “U” to designate favorable and unfavorable variances, respectively. E8-1 through E8-5 use the following data: The standard operating capacity of Tecate Manufacturing Co. is 1,000 units. A detailed study of the manufacturing data relating to the standard production cost of one product revealed the following: 1. Two pounds of materials are needed to produce one unit. 2. Standard unit cost of materials is $8 per pound. 3. It takes one hour of labor to produce one unit. 4. Standard labor rate is $10 per hour. 5. Standard overhead (all variable) for this volume is $4,000. Each case in E8-1 through E8-5 requires the following: a. Set up a standard cost summary showing the standard unit cost. b. Analyze the variances for materials and labor. c. Make journal entries to record the transfer to Work in Process of: 1. Material cost 2. Labor Cost 3. Overhead cost (When making these entries, include the variances.) d. Prepare the journal entry to record the transfer of costs to the finished goods account. E8-1 Standard unit cost; variance analysis; journal entries1,000 units were started and finished. Case 1: All prices and quantities for the cost elements are standard, except for materials cost, which is $8.75per pound. Case 2: All prices and quantities for the cost elements are standard, except that 1,800 lb of materials were used. E8-2 Standard unit cost; variance analysis; journal entries 1000 units were started and finished.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
In all of the exercises involving variances, use “F” and “U” to designate favorable and unfavorable variances, respectively.
E8-1 through E8-5 use the following data:
The standard operating capacity of Tecate Manufacturing Co. is 1,000 units. A detailed study of the manufacturing data relating to the standard production cost of one product revealed the following:
1. Two pounds of materials are needed to produce one unit.
2. Standard unit cost of materials is $8 per pound.
3. It takes one hour of labor to produce one unit.
4. Standard labor rate is $10 per hour.
5. Standard
Each case in E8-1 through E8-5 requires the following:
a. Set up a
b. Analyze the variances for materials and labor.
c. Make journal entries to record the transfer to Work in Process of:
1. Material cost
2. Labor Cost
3. Overhead cost (When making these entries, include the variances.)
d. Prepare the
E8-1 Standard unit cost; variance analysis; journal entries1,000 units were started and finished.
Case 1: All prices and quantities for the cost elements are standard, except for materials cost, which is $8.75per pound.
Case 2: All prices and quantities for the cost elements are standard, except that 1,800 lb of materials were used.
E8-2 Standard unit cost; variance analysis; journal entries 1000 units were started and finished.
Case 1: All prices and quantities are standard, except for the labor rate, which is $10.40per hour.
Case 2: All prices and quantities are standard, except for labor hours, which totaled 850.
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