Rocky Mountain Camping Equipment, Inc. has established the following direct-material standards for its two products. Standard Price Standard camping tent Deluxe backpacking tent Standard Quantity 24 yards 19 yards $11.00 $8.20 per yard per yard During March, the company purchased 4,400 yards of tent fabric for its standard model at a cost of $49,720. The actual March production of the standard tent was 140 tents, and 3,460 yards of fabric were used. Also during March, the company purchased 1,400 yards of the same tent fabric for its deluxe backpacking tent at a cost of $11,060. The firm used 4,180 yards of the fabric during March in the production of 220 deluxe tents. Required: 1. Compute the direct-material purchase price variance and quantity variance for March. 2. Prepare journal entries to record the purchase of material, use of material, and incurrence of variances in March.
Rocky Mountain Camping Equipment, Inc. has established the following direct-material standards for its two products. Standard Price Standard camping tent Deluxe backpacking tent Standard Quantity 24 yards 19 yards $11.00 $8.20 per yard per yard During March, the company purchased 4,400 yards of tent fabric for its standard model at a cost of $49,720. The actual March production of the standard tent was 140 tents, and 3,460 yards of fabric were used. Also during March, the company purchased 1,400 yards of the same tent fabric for its deluxe backpacking tent at a cost of $11,060. The firm used 4,180 yards of the fabric during March in the production of 220 deluxe tents. Required: 1. Compute the direct-material purchase price variance and quantity variance for March. 2. Prepare journal entries to record the purchase of material, use of material, and incurrence of variances in March.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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Transcribed Image Text:Rocky Mountain Camping Equipment, Inc. has established the following direct-material standards for its two products.
Standard
Price
Standard
camping tent
Deluxe
backpacking
tent
Standard
Quantity
24 yards
19 yards
$11.00
$ 8.20
per
yard
per
yard
During March, the company purchased 4,400 yards of tent fabric for its standard model at a cost of $49,720. The actual
March production of the standard tent was 140 tents, and 3,460 yards of fabric were used. Also during March, the
company purchased 1,400 yards of the same tent fabric for its deluxe backpacking tent at a cost of $11,060. The firm used
4,180 yards of the fabric during March in the production of 220 deluxe tents.
Required:
1. Compute the direct-material purchase price variance and quantity variance for March.
2. Prepare journal entries to record the purchase of material, use of material, and incurrence of variances in March.
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