Question

Standard material cost per unit of product is 0.5 pounds at $7.40 per pound, and standard direct labor cost is 1.5 hours at $13.00 per hour. The total actual materials cost represents 4,900 pounds purchased at $7.70 per pound. Total actual labor cost represents 14,200 hours at $12.60 per hour. According to standards, variable overhead rate is applied at $0.70 per direct labor hour (based on a normal capacity of 15,000 direct labor hours or 10,000 units of product). Assume that all fixed overhead is applied to work in progress inventory.

Variances, Entries, and Income Statement A summary of Glendale Company's manufacturing variance report for May 2016 follows: Total Standard Costs (9,200 units) Actual Costs (9,200 units) Variances Direct material $34,040 $37,730 $3,690 U Direct labor 179,400 178,920 480 F Variable overhead 9,660 9,480 180 F Fixed overhead 9,660 9,660 $232,760 $235,790 $3,030 U Standard material cost per unit of product is 0.5 pounds at $7.40 per pound, and standard direct labor cost is 1.5 hours at $13.00 per hour. The total actual materials cost represents 4,900 pounds purchased at $7.70 per pound. Total actual labor cost represents 14,200 hours at $12.60 per hour. According to standards, variable overhead rate is applied at $0.70 per direct labor hour (based on a normal capacity of 15,000 direct labor hours or 10,000 units of product). Assume that all fixed overhead is applied to work in progress inventory. a. Determine the following variances: Do not use negative signs with any of your answers. Next to each variance answer, select either "F" for Favorable or "U" for Unfavorable. $ Materials Variances Actual cost: Split cost: Standard cost: Materials price Materials efficiency $ Labor Variances Actual cost: $ Split cost: Standard cost: $ Labor rate Labor efficiency $

Answer 1

Solution:

a.)

Materials Variance:

Actual cost	$37,730
Split cost	$36,260(4,900 ×$7.40)
Standard cost	$34,040
Materials price	$1,470	U
Materials efficiency	$2,220	U

Labor variance:

Actual cost	$178,920
Split cost	$184,600(14,200 × $13)
Standard cost	$179,400
Labor rate	$5,680	F
Labor efficiency	$5,200	U

Variance overhead variance:

Actual cost	$9,480
Split cost	$9,940
Standard cost	$9,660
Variable overhead spending	$460	F
Variable overhead efficiency	$280	U

b.)

General Journal:

Description	Debit ($)	Credit ($)
Materials inventory	36,260
Materials price variance	1470
Accounts payable		37,730
To record the purchase of direct materials
Work in process inventory	34,040
Materials efficiency variance	2,220
Materials inventory		36,260
To record the use of materials
Work in process inventory	179,400
Labor efficiency variance	5,200
Labor rate variance		5,680
Wages payable		178,920
To record direct labor costs and related cost variance
Work in process inventory	9,660
Variable overhead efficiency variance	280
Variable overhead spending variance		460
Manufacturing overhead		9,480
To apply variable overhead to work in progress and related cost variance.
Work in process inventory	9,660
Manufacturing overhead		9,660
To apply fixed overhead to work in progress

c.) General Journal:

Description	Debit ($)	Credit ($)
Finished goods inventory	232,760
Work in process inventory		232,760
To record completion of units
Cost of goods sold ($232,760 × 8400units / 9200 units)	212,520
Finished goods inventory		212,520
To record cost of units

d.)

Glendale Company

Partial Income Statement

For the month Ended May 31,2016

Sales		$453,600
Cost of goods at standard cost		-$212,520
Gross profit at standard cost		$241080
Net cost variance :
Materials	$3,690
Labor	$480
Overhead	$180	-$3030
Gross profit at actual cost		$238,050

*

Materials ($1470 + $2220)	$3,690	U
Labor($5680 -$5200)	$480	F
Variable overhead(460 - 280)	$180	F
Net cost variance	$3,030	U

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