
Concept explainers
a.
Provide a
a.

Explanation of Solution
Materials—2 lb @ $8 | $16 |
Labor—1 hr @ $10 | $10 |
Factory overhead | $4 |
Standard unit cost | $30 |
Figure (1)
b.
Examine the variances for materials and labor.
b.

Explanation of Solution
Calculate material price variance:
Calculate materials quantity variance:
Calculate Labor rate variance:
Calculate labor efficiency variance:
c.
Prepare journal entries.
c.

Explanation of Solution
(1)
Date | Account Title and Explanation | Debit ($) | Credit($) |
Work in Process | $17,600 | ||
Materials Price Variance | $950 | ||
Materials Quantity Variance | $2400 | ||
Materials | $16,150 | ||
(to record the entry for direct materials cost when the materials are issued into production) |
Table (1)
(2)
Date | Account Title and Explanation | Debit ($) | Credit($) |
Work in Process | $9,000 | ||
Labor Rate Variance | $180 | ||
Labor efficiency Variance | $2,000 | ||
Payroll | $9,180 | ||
(to record the entry for direct labor cost) |
Table (2)
(3)
Date | Account Title and Explanation | Debit ($) | Credit($) |
Work in Process | $4,400 | ||
Applied Factory overhead ( Refer to note) | $4,400 | ||
(to record the entry applying factory overhead to work in process) |
Table (3)
Note: $4 is obtained by dividing $4,000 by 1,000 units.
d.
Prepare the
d.

Explanation of Solution
Case 1 and case 2:
Date | Account Title and Explanation | Debit ($) | Credit($) |
Finished Goods | $33,000 | ||
Work in process | $33,000 | ||
(to record the entry for finished goods at standard cost) |
Table (4)
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Chapter 8 Solutions
Principles of Cost Accounting
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