Question

Maple Leaf Production manufactures truck tires. The following information is available for the last operating period.

• Maple Leaf produced and sold 95,000 tires for $45 each. Budgeted production was 99,000 tires.
• Standard variable costs per tire follow.

Direct materials: 4 pounds at $2.00	$	8.00
Direct labor: 0.40 hours at $18.50		7.40
Variable production overhead: 0.25 machine-hours at $14 per hour		3.50
Total variable costs	$	18.90

• Fixed production overhead costs:

Monthly budget $1,400,000

• Fixed overhead is applied at the rate of $15.00 per tire.
• Actual production costs:

Direct materials purchased and used: 384,000 pounds at $1.70	$	652,800
Direct labor: 36,500 hours at $18.80		686,200
Variable overhead: 25,000 machine-hours at $14.50 per hour		362,500
Fixed overhead		1,401,000

(Appendix) Prepare the journal entries to record the activity for the last period using standard costing. Assume that all variances are closed to cost of goods sold at the end of the operating period.

Answer 1

Answer with working notes is given below

Direct Material Direct Labor Variable Overhead Price variance Actual cost Actual input Standard price Actual input at standard price Price variance Variance type $652,800 384,000 $2 $768,000 -$115,200 Favourable $686, 2001 36500 18.5 $675,250 $10,950 Adverse $362,500 A 25000 14 $350,000 B $12,500 A-B Adverse Efficiency Variance Standard input Standard input for actual output Standard price Standard cost for actual output Efficiency variance Variance type 4.00 380,000 $2.00 $760,000 $8,000 Adverse 0.40 38,000 $18.50 $703,000 $27,750 Favourable 0.25 23,750 (95,000 X standard input) $14.000 $332,500C $17,500 B-C Adverse Overall Variance Total Variance Variance type -$107,200 Favourable $16,800 Favourable $30,000 Price variance + Efficiency variance Adverse Fixed overhead variance Budgeted units Standard rate Budgeted fixed overheads 99,000 $15 $1,485,000 A Actual units Overhead applied at standard rate 95,000 $1,425,000 B Actual overheads $1,401,000 C Fixed overhead variance -$24,000 Favourable (C-B) Production volume variance $60,000 Unfavourable (A-B) spending variance -$84,000 Favourable (C-A) Credit General Journal Work in process Account Material efficiency variance To Material price variance To Accounts payable Debit $760,000 $8,000 $115,200 $652,800 $703,000 $10,950 Work in process Account Direct labor price variance To Direct labor efficiency variance To Salaries and wages payable $27,750 $686,200 $1,757,500 Work in process Account To Variable Overhead (Applied) To Fixed manufacturing overhead (Applied) $332,500 $1,425,000 Variable Overhead (Applied) Variable Overhead price variance Variable Overhead efficiency variance To Variable Overhead (Actual) $332,500 $12,500 $17,500 $362,500 $1,425,000 $60,000 Fixed Overhead (applied) Fixed overhead volume variance To Fixed Overhead spending variance To Fixed Overhead (Actual) $84,000 $1,401,000 $3,220,500 Finished goods inventory To Work in process $3,220,500 $4,275,000 Accounts Receivable To Sales $4,275,000 $3,220,500 Cost of Goods sold To Finished Good inventory $3,220,500 $115,200 $27,750 $84,000 Material price variance Direct labor efficiency variance Fixed Overhead spending variance To Material efficiency variance To Direct labor price variance To Variable Overhead price variance To Variable Overhead efficiency variance To Fixed overhead volume variance To Cost of Goods sold $8,000 $10,950 $12,500 $17,500 $60,000 $118,000