GB519 Measurement and Decision MakingExercise 14-56 Page 629Exercise 14-56Boron Chemical Company produces a synthetic resin that is used in the automotiveindustry. The company uses a standard cost system. For each gallon of output, thefollowing direct manufacturing costs are anticipated:Direct labor:2 hoursDirect Materials: 2 gallons$25/hr$10/gal=$50.00=$20.00During December of 2010, Boron produced a total of 2,500 gallons of output andincurred the following direct manufacturing costs:Direct labor:4,900 hours worked @ an average wage rate of $19.50/hrDirect Materials: Purchased: 6,000 gallons@ $10.45/galUsed in production: 5,100 gallonsBoron recordes price variances for materials at the time of purchaseRequired – give journal entries for the following events and transactions:1. Purchase, on credit, of direct materialsActual Cost6,000 @ $10.45/galStandard Cost 6,000 @ $10.00/gal6000 gallons @ $10 a gallon = $60,000Price Variance$2,700Accounts Payable $62,700Open account recording will state that direct materials = 6,000 gallonsat $10.00 per gallon wil equal $10.452. Direct materials issued to production.Actual Cost5,100 gallonsStandard Cost 5,000 gallons (2 per unit) @ $10.00/gallon2,500 x 2 gallons x $10.00 per gallon = $50,000Variance$1,000Materials $5,100 gallons x $10.00/gallon = $51,000Materials cost is $20/unit for full production of the period at 2,500 units3. Direct labor cost of units completed this period.Actual Cost4,900 hours @ $19.50/hrStandard Cost 5,000 hours (2hrs/unit) @ $25.00/hr2,500 x 2 hours x $25.00/hr = $125,000Variance = $5.50/hr x 4,900 hours= $26,950Efficiency Variance = 100 hrs x $25.00/hr = $2,500Wages (4,900 hrs x $19.50/hr= $95,550Direct Labor cost s ($50/unit) for the completed production (2,500 units)and the actual labor costs during the period4. Direct manufacturing cost (direct labor plus direct materials)of units completed and transferred to Finished Goods InventoryActual Cost2,500 unitsStandard Cost 2,500 units @ $10×2+$25×2 = $70.00Inventory$70.00/unit x 2,000 units= $175,000Direct manufacturing costs are recorded using cost of goodsmanufactured for the period.5. Sale, for $150.00 per gallon, of 2,000 gallons of output (hint:you will need two journal entries here)Actual Cost2000 gallonsStandard Cost 2000 gallons @ $70.00/unit$70 x 2,000 units = $140,000Inventory= $140,000Direct manufacturing cost of cost of good sold for the period.Accounts Receivable = $150/unit x 2,000 units= $300,000Sales Revenue = $300,000Sales revenue is recorded using accounts receivable.Dana RevierGB519 Measurement and Decision MakingProblem 15-58 Page 690Problem 15-58Four Variance AnalysisAble Control Company, which manufactures electrical switches, usesa standard cost system and carries all inventory and standard cost.The standard factory overhead cost per switch is based on directlabor hoursVariable Overhead5 hours$8.00/hrFixed Overhead5 hours$12.00/hrTotal standard overhead cost per unit produced$100.00**based on practical capacity of 300,000 direct labor hours per monthThe following information is for the month of October:- The company produced 56,000 switches, although 60,000 switcheswere scheduled to be produced- The company worked 275,000 direct labor hours ata total cost of$2,550,000- Variable overhead costs were $2,340,000- Fixed overhead costs were $3,750,000The production manager argued during th elast performance review tha the companyshould use more up-to-date base for charging factory overhead costs to production.She commented that her factory had been highly automated in the last two yearsand as a result now has hardly any direction labor. The factory hires only highlyskilled workers to set up productionruns and to do periodic adjustments ofmachinery whenever the need arisesRequired1. Compute the following for Able Control Company:a. The fixed overhead spending variance for October

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