Concept explainers
a.
Compute the materials price and quantity variances.
a.

Explanation of Solution
Variance:
Variance refers to the difference level in the actual cost incurred and
Compute the materials price variances.
Compute the materials quantity variances.
Therefore, the materials price and quantity variances of Enterprise S are $29,690 and $6,258.
Working Notes:
Calculate the actual price per pound:
(1)
Calculate the standard quantity allowed:
(2)
b.
Compute the labor rate and efficiency variances.
b.

Explanation of Solution
Compute the labor rate variances.
Compute the labor efficiency variances.
Therefore, the labor rate and efficiency variances of Enterprise S are $1,100 and ($1,207).
Working Notes:
Calculate the actual rate per hour:
(3)
Calculate the standard hours allowed:
(4)
c.
Compute the manufacturing
c.

Explanation of Solution
Compute the manufacturing overhead spending variances.
Particulars | Amount in $ | Amount in $ |
Standard Overhead cost incurred: | ||
Fixed | 2,800 | |
Variable (5) | 1,323 | |
4,263 | ||
Actual Overhead cost incurred: | ||
Fixed | 2,450 | |
Variable | 1,175 | |
3,625 | ||
Overhead spending variance (favorable) | 498 |
(Table 1)
Compute the manufacturing overhead volume variances.
Particulars | Amount |
Overhead applied at standard cost ($29 × 147 batches) | $ 4,263 |
Less: Standard overhead cost allowed | $4,123 |
Volume variance (favorable) | $ 140 |
(Table 2)
Therefore, the manufacturing overhead spending and volume variances of Enterprise S are $498 and $140.
Working note:
Calculate the standard variable overhead allowed:
(5)
d.
Prepare
d.

Explanation of Solution
Prepare journal entry to record to charge materials (at standard) to Work in Process.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Work in process inventory ( at Standard) (6) | 629,748 | ||
Materials quantity variance (favorable) | 6,258 | ||
Materials price variance (favorable) | 29,690 | ||
Direct materials inventory (Actual) | 593,800 | ||
(To record the cost of direct materials charged to production) |
(Table 3)
- Work in process inventory is an asset and there is an increase in the value of an asset. Hence, debit the work in process inventory by $629,748.
- Materials quantity variance is an asset and there is a decrease in the value of an asset. Hence, credit the materials quantity variance by $6,258.
- Materials price variance is an asset and there is a decrease in the value of an asset. Hence, credit the materials price variance by $26,690.
- Direct materials inventory is an asset and there is a decrease in the value of an asset. Hence, credit the direct materials inventory by $593,800.
Working notes:
Calculate the work in process inventory for direct materials:
(6)
e.
Prepare journal entry to record to charge direct labor (at standard) to Work in Process.
e.

Explanation of Solution
Prepare journal entry to record to charge direct labor (at standard) to Work in Process.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Work in process inventory ( at Standard) (7) | 17,493 | ||
Labor efficiency variance (Unfavorable) | 1,207 | ||
Labor rate variance(Favorable) | 1,100 | ||
Direct Labor (Actual) | 17,600 | ||
(To record the cost of direct labor charged to production.) |
(Table 4)
- Work in process inventory is an asset and there is an increase in the value of an asset. Hence, debit the work in process inventory by $17,493.
- Labor efficiency variance is an asset and there is an increase in the value of an asset. Hence, debit the labor efficiency variance by $1,207.
- Labor rate variance is an asset and there is a decrease in the value of an asset. Hence, credit the labor rate variance by $1,100.
- Direct labor is an asset and there is a decrease in the value of an asset. Hence, credit the direct labor by $17,600.
Working notes:
Calculate the work in process inventory for direct labor cost:
(7)
f.
Prepare journal entry to record to charge manufacturing overhead (at standard) to Work in Process.
f.

Explanation of Solution
Prepare journal entry to record to charge manufacturing overhead (at standard) to Work in Process.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Work in process inventory ( at Standard) | 4,263 | ||
Overhead spending variance | 498 | ||
Overhead volume variance | 140 | ||
Manufacturing Overhead (Actual) | 3,625 | ||
(To apply overhead to production.) |
(Table 5)
- Work in process inventory is an asset and there is an increase in the value of an asset. Hence, debit the work in process inventory by $4,263.
- Overhead spending variance (Expense) is a component of
stockholder’s equity and there is an increase in the value of expense. Hence, debit the overhead spending variance by $498. - Overhead volume variance (Expense) is a component of stockholder’s equity and there is a decrease in the value of expense. Hence, credit the overhead volume variance by $140.
- Manufacturing overhead (Expense) is a component of stockholder’s equity and there is a decrease in the value of expense. Hence, credit the manufacturing expense by $3,625.
g.
Prepare journal entry to record the transfer of 147 batches of puppy meal produced in April to Finished Goods.
g.

Explanation of Solution
Prepare journal entry to record the transfer of 147 batches of puppy meal produced in April to Finished Goods.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Finished goods inventory (at standard cost) | 651,504 | ||
Work in process inventory (at standard cost) (8) | 651,504 | ||
(To transfer147 batches of puppy meal to finished goods in April.) |
(Table 6)
- Finished goods inventory is an asset and there is an increase in the value of an asset. Hence, debit the finished goods inventory by $651,504.
- Work in process inventory is an asset and there is a decrease in the value of an asset. Hence, credit the work in process inventory by $651,504.
Working Notes:
Calculate the work in process inventory at standard cost:
(8)
h.
Prepare journal entry to record to close any over- or underapplied overhead to Cost of Goods Sold.
h.

Explanation of Solution
Prepare journal entry to record to close any over- or underapplied overhead to Cost of Goods Sold.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Overhead spending variance (favorable) | 498 | ||
Overhead volume variance (favorable) | 140 | ||
Cost of goods sold | 638 | ||
(To close overhead variances to cost of goods sold.) |
(Table 7)
- Overhead spending variance (Expense) is a component of stockholder’s equity and there is an increase in the value of expense. Hence, debit the overhead spending variance by $498.
- Overhead volume variance (Expense) is a component of stockholder’s equity and there is an increase in the value of expense. Hence, debit the overhead volume variance by $140.
- Cost of goods sold (expense) is component of stockholder’s equity and there is a decrease in the value of expense. Hence, credit the cost of goods sold by $638.
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