Prepare

Explanation of Solution
Prepare journal entries to record the activity for the last month using standard costing for Product M:
For direct material:
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) |
Work-in-Process Inventory | 45,000 | |||
Materials Efficiency Variance | 1,500 | |||
Materials Price Variance | 4,650 | |||
Accounts Payable | 41,850 | |||
(To record the cost related to direct material) |
Table (1)
For direct labor:
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) |
Work-in-Process Inventory | 300,000 | |||
Direct Labor Price Variance | 3,675 | |||
Direct Labor Efficiency Variance | 6,000 | |||
Wages Payable | 297,675 | |||
(To record the cost related to direct labor) |
Table (2)
For variable
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) |
Work-in-Process Inventory (Variable overhead) | 240,000 | |||
Variable Overhead Applied | 240,000 | |||
(To record the variable applied overhead) | ||||
Overhead (Actual) | 242,550 | |||
Miscellaneous Payables and Inventory Accounts | 242,550 | |||
(To record the actual overhead) | ||||
Variable Overhead (Applied) | 240,000 | |||
Variable Overhead Price Variance | 7,350 | |||
Variable Overhead Efficiency Variance | 4,800 | |||
Variable Overhead (Actual) | 242,550 | |||
(To record the variable applied overhead and variances) | ||||
Table (3)
For fixed overhead:
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) |
Work-in-Process Inventory (Fixed overhead) | 291,600 | |||
Fixed Overhead Applied | 291,600 | |||
(To record the fixed applied overhead) | ||||
Fixed Overhead (Actual) | 313,950 | |||
Miscellaneous Payables and Inventory Accounts | 313,950 | |||
(To record the actual overhead) | ||||
Fixed Overhead (Applied) | 291,600 | |||
Fixed Overhead Production volume Variance | 43,740 | |||
Fixed Overhead price Variance | 21,390 | |||
Fixed Overhead (Actual) | 313,950 | |||
(To record the variable fixed applied overhead and variances) | ||||
Table (4)
Prepare journal entries to record the activity for the last month using standard costing for Product V:
For direct material:
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) |
Work-in-Process Inventory | 79,200 | |||
Materials Price Variance | 3,525 | |||
Materials Efficiency Variance | 1,650 | |||
Accounts Payable | 81,075 | |||
(To record the cost related to direct material) |
Table (5)
For direct labor:
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) |
Work-in-Process Inventory | 540,000 | |||
Direct Labor Price Variance | 11,100 | |||
Direct Labor Efficiency Variance | 15,000 | |||
Wages Payable | 566,100 | |||
(To record the cost related to direct labor) |
Table (6)
For variable overhead:
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) |
Work-in-Process Inventory (Variable overhead) | 378,000 | |||
Variable Overhead Applied | 378,000 | |||
(To record the variable applied overhead) | ||||
Overhead (Actual) | 378,510 | |||
Miscellaneous Payables and Inventory Accounts | 378,510 | |||
(To record the actual overhead) | ||||
Variable Overhead (Applied) | 378,000 | |||
Variable Overhead Efficiency Variance | 10,500 | |||
Variable Overhead Price Variance | 9,990 | |||
Variable Overhead (Actual) | 378,510 | |||
(To record the variable applied overhead and variances) | ||||
Table (7)
For fixed overhead:
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) |
Work-in-Process Inventory (Fixed overhead) | 367,200 | |||
Fixed Overhead Applied | 367,200 | |||
(To record the fixed applied overhead) | ||||
Fixed Overhead (Actual) | 396,000 | |||
Miscellaneous Payables and Inventory Accounts | 396,000 | |||
(To record the actual overhead) | ||||
Fixed Overhead (Applied) | 367,200 | |||
Fixed Overhead Production volume Variance | 30,600 | |||
Fixed Overhead price Variance | 1,800 | |||
Fixed Overhead (Actual) | 396,000 | |||
(To record the variable fixed applied overhead and variances) | ||||
Table (8)
For finished goods:
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) |
Finished Goods Inventory (Product M) | 876,600 | |||
Finished Goods Inventory (Product V) | 1,364,400 | |||
Work-in-Process Inventory | 876,600 | |||
Work-in-Process Inventory | 1,364,400 | |||
(To record the finished goods inventory) |
Table (9)
For the sales made:
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) |
3,150,000 | ||||
Sales Revenue | 3,150,000 | |||
(To record the sales made) | ||||
Cost of Goods Sold (Product M) | 876,600 | |||
Cost of Goods Sold (Product V) | 1,364,400 | |||
Finished Goods Inventory | 876,600 | |||
Finished Goods Inventory | 1,364,400 | |||
(To record the cost of goods sold) |
Table (10)
Record the disposition of variances:
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) |
Cost of Goods Sold | 76,710 | |||
Materials Price Variance (Product M) | 4,650 | |||
Materials Efficiency Variance (Product V) | 1,650 | |||
Direct Labor Efficiency Variance (Product M) | 6,000 | |||
Variable Overhead Efficiency Variance (Product M) | 4,800 | |||
Variable Overhead Price Variance (Product V) | 9,990 | |||
Fixed Overhead Price Variance (Product M) | 21,390 | |||
Fixed Overhead Price Variance (Product V) | 1,800 | |||
Materials Efficiency Variance (Product M) | 1,500 | |||
Materials Price Variance (Product V) | 3,525 | |||
Direct Labor Price Variance (Product M) | 3,675 | |||
Direct Labor Price Variance (Product V) | 11,100 | |||
Direct Labor Efficiency Variance (Product V) | 15,000 | |||
Variable Overhead Price Variance (Product M) | 7,350 | |||
Variable Overhead Efficiency Variance (Product V) | 10,500 | |||
Fixed Overhead Production Volume Variance (Product M) | 43,740 | |||
Fixed Overhead Production Volume Variance (Product V) | 30,600 | |||
(To close the variance accounts to Cost of Goods Sold) | ||||
Table (11)
Working notes:
Fixed overhead cost Variance | Product M | Product V |
Price Variance | $ 9,990F | $ 1,800F |
Production Volume Variance | $ 10,500U | $ 30,600U |
Direct Material Variances | Product M | Product V |
Price Variance | $4,650 | $3,525 |
Efficiency Variance | $1,500 | $1,650 |
Total Variance | $3,150F | $1,875U |
Direct Labor Variances | ||
Price Variance | $3,675 | $11,100 |
Efficiency Variance | $6,000 | $15,000 |
Total Variance | $2,325F | $26,100U |
Variable Overhead Variance: | ||
Price Variance | $7,350 | $9,990 |
Efficiency Variance | $4,800 | $10,500 |
Total Variance | $2,550U | $510F |
Table (12)
Calculate fixed overhead variance:
For Product M:
Price Variance:
Production volume variance:
Thus,
For Product V:
Production volume variance:
Thus,
Prepare fixed overhead cost variance analysis for product M and V:
Fixed overhead cost Variance | Product M | Product V |
Price Variance | $9,990F | $1,800F |
Production Volume Variance | $ 10,500U | $ 30,600U |
Table (13)
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Chapter 16 Solutions
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