ACCOUNTING RECORD
Bintang Cakra, Co Corporation manufactures a product called
Maxitech, which has the following standard costs:
Materials …………………………………… 5 units x $ 6 =
Labor ………………………………………….. ¾ hr. at 12 =
Factory overhead ( based on normal capacity
of 5,000 machine hours ) ………… 2 hrs. at 14 =
Total standard cost ……………………..
$ 30.00
$ 9.00
$ 28.00
$ 67.00
The following information pertains to actual production activity
for July:
a. Work in process, beginning inventory contained 300 units
of maxitech(complete as to material, but only 2/3
complete as to labor and 1/2 complete as to machining),
and ending inventory contained 200 units (complete as to
materials, but only 2/5 complete as to labor and ¼
complete as to machining). 2.400 units of maxitech were
completed and transferred to finished goods inventory
during July.
b. 11,000 units of materials were purchased on account at a
total cost $ 66,900. The materials price variance is
recorded when the materials are purchased.
c. 12,000 units of materials were issued to production and
used during the period.
d. Direct labor cost totaled $ 20,570 for 1,700 actual hours
worked. Assume the liability has already been recorded,
but the cost has not been distributed.
e. Actual machine required during July totaled 4,900 hours.
f. Actual factory overhead was $ 67,700. Factory Overhead
Control is closed at the end of each month.
g. 20% of the factory overhead budgeted at 5,000 machine
hours was variable cost and the balance was fixed cost.
Required:
Prepare the journal entries to record the information provided
including two variance for material and labor and three
variance for factory overhead.
Answer :
Material Labor Overhead
Units completed and transferred out this period 2,400
2,400
2,400
Less all units in beginning inventory
300
300
300
Equivalent units started and completed
This period
2,100
2,100
2,100
Add equivalent units required to complete
Beginning inventory
0
100
150
Add equivalent units in ending inventory
200
100
50
Equivalent units of production this period
2,300
2,300
2,300
Multiply by standard quantity of input
Per unit of product
5 units ¾ DLH 2 MH
Standard quantity of input allowed for
Work produced during the period
11,500
1,725 4,600
Materials(11,000 AQ purchased x $26SP) $ 66,000
Materials Purchase Price variance ……
1,000
Account Payable ………………………..
$ 67,000
Work In Process ($6SPx11,500 SQ allowed) 69,000
Materials Quantity Variance …………….
3,000
Materials ($6x 12,000 AQ issued) ..
$ 72,000
Work In Process ($12x1,725 SH allowed)
Labor Rate Variance
( $12.10 AR - $ 12 SR)x 1,700 AH)
Labor Efficiency Variance
($12 SR x (1,700 AH – 1,725 SH)
Payroll ………………………………………
20,700
Factory Overhead Control………………..
Various Credits ………………………….
69,000
170
300
20,570
69,000
Work In Process ($14 FO rate x 4,600 SH allowed
Applied Factory Overhead …………..
64,400
Applied Factory Overhead ……………….
Variable Efficiency Variance
64,400
($2.80 var. rate* x (4,900 AH -4,600 SH)
Volume variance
( $11.20 fix.rate** x (5,000BH-4,600 SH
Spending variance ……………………
Factory Overhead Control ………….
64,400
840
4,480
720
69,000
*). $14 FO rate x 20% variable = $ 2,80 variable rate
**). $14 FO rate – 2.8 variable rate = $11,20 fixed rate.