Standard Costs in Process Costing (Chapter 6); All Variances and Journal Entries DashCompany adopted a standard costing system several years ago. The standard costs for the primecosts (i.e., direct materials and direct labor) of its single product are:Material (8 kilograms × $5.00 per kilogram) $ 40.00Labor (6 hours × $18.20 per hour) 109.20All materials are added at the beginning of processing. The following data were taken from thecompany’s records for November:In-process beginning inventory NoneIn-process ending inventory 800 units, 75% complete as to direct laborUnits completed 5,600 unitsBudgeted output 6,000 unitsPurchases of materials 50,000 kilogramsTotal actual direct labor costs $600,000Actual direct labor hours 36,500 hoursMaterials usage variance $1,500 UnfavorableTotal materials variance $750 UnfavorableRequired1. Compute for November:a. The direct labor efficiency variance, rounded to the nearest whole dollar. Is this variance favorable(F) or unfavorable (U)? b. The direct labor rate variance, rounded to the nearest whole dollar. Is this variance favorable (F) orunfavorable (U)? c. The actual number of kilograms of material used in the production process during the month,rounded to the nearest whole number.d. The actual price paid per kilogram of material during the month, rounded to 3 decimal places (e.g.,$3.4591 = $3.459); the company calculates the direct materials price variance at point of purchase.e. The amount of direct materials cost and direct labor cost transferred to the Finished Goods Inventoryaccount, each rounded to the nearest whole dollar.f. The total amount of direct materials cost and direct labor cost in the Work-in-Process Inventoryaccount at the end of the month, rounded to the nearest whole dollar.2. Prepare journal entries to record all transactions, including the variances in requirement 1.
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.
Standard Costs in
Company adopted a
costs (i.e., direct materials and direct labor) of its single product are:
Material (8 kilograms × $5.00 per kilogram) $ 40.00
Labor (6 hours × $18.20 per hour) 109.20
All materials are added at the beginning of processing. The following data were taken from the
company’s records for November:
In-process beginning inventory None
In-process ending inventory 800 units, 75% complete as to direct labor
Units completed 5,600 units
Budgeted output 6,000 units
Purchases of materials 50,000 kilograms
Total actual direct labor costs $600,000
Actual direct labor hours 36,500 hours
Materials usage variance $1,500 Unfavorable
Total materials variance $750 Unfavorable
Required
1. Compute for November:
a. The direct labor efficiency variance, rounded to the nearest whole dollar. Is this variance favorable
(F) or unfavorable (U)?
b. The direct labor rate variance, rounded to the nearest whole dollar. Is this variance favorable (F) or
unfavorable (U)?
c. The actual number of kilograms of material used in the production process during the month,
rounded to the nearest whole number.
d. The actual price paid per kilogram of material during the month, rounded to 3 decimal places (e.g.,
$3.4591 = $3.459); the company calculates the direct materials price variance at point of purchase.
e. The amount of direct materials cost and direct labor cost transferred to the Finished Goods Inventory
account, each rounded to the nearest whole dollar.
f. The total amount of direct materials cost and direct labor cost in the Work-in-Process Inventory
account at the end of the month, rounded to the nearest whole dollar.
2. Prepare journal entries to record all transactions, including the variances in requirement 1.
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