Answered: The following direct materials variance…

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

The following direct materials variance analysis was performed for

Smithson.

1(Click

the icon to view the materials variance analysis.)

Read the

requirements2.

Requirement 1. Record

Smithson's

direct materials journal entries. Assume purchases were made on account.

Begin by journalizing the purchase of direct materials, including the related variance. (Prepare a single compound journal entry. Record debits first, then credits. Select the explanations on the last line of the journal entry table.)

Date	Accounts and Explanation	Debit	Credit
	(1) Raw Materials Inventory
	(2) Raw Materials Inventory
			(3) Accounts Payable
			(4) Work-in-Process Inventory
			(5) Purchased direct materials.

Now, journalize the usage of direct materials, including the related variance. (Prepare a single compound journal entry. Record debits first, then credits. Select the explanations on the last line of the journal entry table.)

Date	Accounts and Explanation	Debit	Credit
	(6)
	(7)
			(8)
			(9)
			(10)

Requirement 2. Explain what management will do with this variance information.

(11)

enough for

Smithson's

management to know that a variance occurred. They

(12)

why it occurred. Each of the direct materials variances will be

(13)

1: Data Table

AC × AQ

SC × AQ

SC × SQ

$0.65 per pounds

$0.35 per pounds

$0.35 per pound

7,600 pounds

7,200 pounds

$4,940

$2,660

$2,520

Cost

Efficiency

Variance

$2,280 U

$140 U

2: Requirements

1.	Record Smithson's direct materials journal entries. Assume purchases were made on account.
2.	Explain what management will do with this variance information.

(1)

Accounts Payable

Cost of Goods Sold

Direct Materials Cost Variance

Direct Materials Efficiency Variance

Finished Goods Inventory

Manufacturing Overhead

Raw Materials Inventory

Work-in-Process Inventory

(2)

Accounts Payable

Cost of Goods Sold

Direct Materials Cost Variance

Direct Materials Efficiency Variance

Finished Goods Inventory

Manufacturing Overhead

Raw Materials Inventory

Work-in-Process Inventory

(3)

Accounts Payable

Cost of Goods Sold

Direct Materials Cost Variance

Direct Materials Efficiency Variance

Finished Goods Inventory

Manufacturing Overhead

Raw Materials Inventory

Work-in-Process Inventory

(4)

Accounts Payable

Cost of Goods Sold

Direct Materials Cost Variance

Direct Materials Efficiency Variance

Finished Goods Inventory

Manufacturing Overhead

Raw Materials Inventory

Work-in-Process Inventory

(5)

Completed goods transferred.

Cost of sales at standard cost.

Purchased direct materials.

To adjust Manufacturing Overhead.

Used direct materials.

(6)

Accounts Payable

Cost of Goods Sold

Direct Materials Cost Variance

Direct Materials Efficiency Variance

Finished Goods Inventory

Manufacturing Overhead

Raw Materials Inventory

Work-in-Process Inventory

(7)

Accounts Payable

Cost of Goods Sold

Direct Materials Cost Variance

Direct Materials Efficiency Variance

Finished Goods Inventory

Manufacturing Overhead

Raw Materials Inventory

Work-in-Process Inventory

(8)

Accounts Payable

Cost of Goods Sold

Direct Materials Cost Variance

Direct Materials Efficiency Variance

Finished Goods Inventory

Manufacturing Overhead

Raw Materials Inventory

Work-in-Process Inventory

(9)

Accounts Payable

Cost of Goods Sold

Direct Materials Cost Variance

Direct Materials Efficiency Variance

Finished Goods Inventory

Manufacturing Overhead

Raw Materials Inventory

Work-in-Process Inventory

(10)

Completed goods transferred.

Cost of sales at standard cost.

Purchased direct materials.

To adjust Manufacturing Overhead.

Used direct materials.

(11)

is not

(12)

do not need to know

must know

(13)

investigated and information wil be obtained from the managers responsible for each.

investigated and the managers responsible for each variance will be blamed.

noted and no further investigations are necessary.

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