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a.
Prepare the
a.
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Explanation of Solution
Prepare the journal entries that the company would make to record and close out the variances as follows:
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) |
Actual Variable | 132,000 | |||
Accounts Payable | 132,000 | |||
(To record the purchase of variable overhead resources) | ||||
Work-in-Process Inventory | 126,000 | |||
Applied Variable Overhead | 126,000 | |||
(To record the variable overhead at standard rates to production) | ||||
Applied Variable Overhead | 126,000 | |||
Variable Overhead Spending Variance | 10,000 | |||
Variable Overhead Efficiency Variance | 4,000 | |||
Actual Variable Overhead | 132,000 | |||
(To record the variable overhead variances) | ||||
Applied Fixed Overhead | 200,000 | |||
Fixed Overhead Price Variance | 10,000 | |||
Fixed Overhead Production Volume variance | 10,000 | |||
Actual Fixed Overhead | 180,000 | |||
(To close the variable overhead variances) | ||||
Variable Overhead Efficiency Variance | 4,000 | |||
Fixed Overhead Price Variance | 10,000 | |||
Fixed Overhead Production volume variance | 10,000 | |||
Variable Overhead Spending Variance | 10,000 | |||
Cost of Goods Sold | 14,000 | |||
(To close overhead cost variances to Cost of Goods Sold) |
Table (1)
Working notes (1): Variable costs:
Actual Costs |
Spending Variance |
Actual Inputs at Standard Price |
Efficiency Variance |
Flexible Budget (Standard Inputs Allowed for Good Output) | |||
$132,000 |
$122,000 ($126,000 – $4,000) |
$126,000 | |||||
$10,000 U ( $132,000 – $122,000) | $4,000 F | ||||||
Figure (1)
Working notes (1): Fixed costs:
Actual Costs |
Price Variance | Budget |
Production Volume Variance | Applied | |||
$180,000 | $190,000 |
$200,000 | |||||
$10,000 F ($180,000 – $190,000) |
$10,000 F ($190,000 – $200,000) | ||||||
Figure (2)
b.
Prepare the journal entries that the company would make to record and close out the variances.
b.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Prepare the journal entries that the company would make to record and close out the variances as follows:
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) |
Actual Variable Overhead | 132,000 | |||
Accounts Payable | 132,000 | |||
(To record the purchase of variable overhead resources) | ||||
Work-in-Process Inventory | 126,000 | |||
Applied Variable Overhead | 126,000 | |||
(To record the variable overhead at standard rates to production) | ||||
Applied Variable Overhead | 126,000 | |||
Variable Overhead Spending Variance | 10,000 | |||
Variable Overhead Efficiency Variance | 4,000 | |||
Actual Variable Overhead | 132,000 | |||
(To record the variable overhead variances) | ||||
Applied Fixed Overhead | 200,000 | |||
Fixed Overhead Price Variance | 10,000 | |||
Fixed Overhead Production Volume variance | 10,000 | |||
Actual Fixed Overhead | 180,000 | |||
(To close the variable overhead variances) | ||||
Variable Overhead Efficiency Variance | 4,000 | |||
Fixed Overhead Price Variance | 10,000 | |||
Fixed Overhead Production volume variance | 10,000 | |||
Variable Overhead Spending Variance | 10,000 | |||
Finished Goods Inventory | 700 | |||
Cost of Goods Sold | 13,300 | |||
(To close overhead cost variances to Cost of Goods Sold) |
Table (2)
Note: Finished Goods Inventory is 5 percent of production.
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Chapter 17 Solutions
Fundamentals Of Cost Accounting (6th Edition)
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