Rocky Mountain Camping Equipment, Inc., has established the following direct-material standards for its two products. Standard Quantity Standard PriceStandard camping tent 22yards $10.00per yardDeluxe backpacking tent 17yards $7.80per yard During March, the company purchased 4,600 yards of tent fabric for its standard model at a cost of $48,760. The actual March production of the standard tent was 160 tents, and 3,600 yards of fabric were used. Also during March, the company purchased 1,600 yards of the same tent fabric for its deluxe backpacking tent at a cost of $11,840. The firm used 4,080 yards of the fabric during March in the production of 240 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. ### Direct-Material Purchase Price and Quantity Variance Calculation**Objective:**Compute the direct-material purchase price variance and quantity variance for March.**Instructions:**1. Perform calculations without rounding intermediate results.2. Evaluate the effect of each variance: - Indicate as "Favorable" or "Unfavorable". - If there is no effect, select "None" and enter "0" for zero variance.**Table Layout:**| a. Direct-material purchase price variance | [Input Field] | [Effect Selection: Favorable/Unfavorable/None] || b. Direct-material quantity variance | [Input Field] | [Effect Selection: Favorable/Unfavorable/None] |Use this template for entering the computed values and determining the impact of variances on your cost analysis. **Journal Entries for March Transactions**Complete this question by entering your answers in the tabs below.**Required 1** | **Required 2****Task**: Prepare journal entries to record the purchase of material, use of material, and incurrence of variances in March. *(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)***Instructions**:- View transaction list- View journal entry worksheet**Entries**:1. **Transaction No. 1:** - **a.** - **Debits:** - Raw-material inventory - **Credits:** - Direct-material purchase price variance - Accounts payable2. **Transaction No. 2:** - **b.** - **Debits:** - Work-in-process inventory - **Credits:** - Direct-material quantity variance - Raw-material inventoryThis exercise involves recording entries that account for purchasing, using materials, and recognizing variances. Understanding these entries is crucial for reconciling inventory and cost variances accurately.

Answered: Rocky Mountain Camping Equipment, Inc.,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Rocky Mountain Camping Equipment, Inc., has established the following direct-material standards for its two products.

	Standard Quantity		Standard Price
Standard camping tent		22	yards	$	10.00	per yard
Deluxe backpacking tent		17	yards	$	7.80	per yard

During March, the company purchased 4,600 yards of tent fabric for its standard model at a cost of $48,760. The actual March production of the standard tent was 160 tents, and 3,600 yards of fabric were used. Also during March, the company purchased 1,600 yards of the same tent fabric for its deluxe backpacking tent at a cost of $11,840. The firm used 4,080 yards of the fabric during March in the production of 240 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.

### Direct-Material Purchase Price and Quantity Variance Calculation

**Objective:**
Compute the direct-material purchase price variance and quantity variance for March.

**Instructions:**
1. Perform calculations without rounding intermediate results.
2. Evaluate the effect of each variance:
- Indicate as "Favorable" or "Unfavorable".
- If there is no effect, select "None" and enter "0" for zero variance.

**Table Layout:**

| a. Direct-material purchase price variance | [Input Field] | [Effect Selection: Favorable/Unfavorable/None] |
| b. Direct-material quantity variance | [Input Field] | [Effect Selection: Favorable/Unfavorable/None] |

Use this template for entering the computed values and determining the impact of variances on your cost analysis.

**Journal Entries for March Transactions**

Complete this question by entering your answers in the tabs below.

**Required 1** | **Required 2**

**Task**: Prepare journal entries to record the purchase of material, use of material, and incurrence of variances in March. *(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)*

**Instructions**:
- View transaction list
- View journal entry worksheet

**Entries**:

1. **Transaction No. 1:**
- **a.**
- **Debits:**
- Raw-material inventory
- **Credits:**
- Direct-material purchase price variance
- Accounts payable

2. **Transaction No. 2:**
- **b.**
- **Debits:**
- Work-in-process inventory
- **Credits:**
- Direct-material quantity variance
- Raw-material inventory

This exercise involves recording entries that account for purchasing, using materials, and recognizing variances. Understanding these entries is crucial for reconciling inventory and cost variances accurately.

Expert Solution

Step 1: Introduction of Variance

Variance analysis is the analysis of difference in cost incurred as per actual when compared to budget. It is a tool which is used for cost control. Detailed analysis will be done against each variance reported.

Direct material price variance = ( actual price - standard price ) x actual quantity

Direct material quantity variance = ( actual quantity - standard quantity ) x standard price

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