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23E

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 1265

Short Answer

Marsh Company uses a standard cost system and reports the following information for 2018:

Standards:

3 yards of cloth per unit at $1.05 per yard

2 direct labor hours per unit at $10.50 per hour

Overhead allocated at $5.00 per direct labor hour

Actual:

2,600 yards of cloth were purchased at $1.10 per yard

Employees worked 1,800 hours and were paid $10.00 per hour

Actual variable overhead was $1,700

Actual fixed overhead was $7,300

Direct materials cost variance $ 130 U

Direct materials efficiency variance 420 F

Direct labor cost variance 900 F

Direct labor efficiency variance 2,100 F

Variable overhead cost variance 1,500 U

Variable overhead efficiency variance 1,500 F

Fixed overhead cost variance 600 U

Fixed overhead volume variance 1,600 F

Marsh produced 1,000 units of finished product in 2018. Record the journal entries to record direct materials, direct labor, variable overhead, and fixed overhead, assuming all expenditures were on account and there were no beginning or ending balances in the inventory accounts (all materials purchased were used in production, and all goods produced were sold). Record the journal entries to record the transfer to Finished Goods Inventory and Cost of Goods Sold (omit the journal entry for Sales Revenue). Adjust the Manufacturing Overhead account

The required journal entries are passed as per the details provided in the question.

See the step by step solution

Step by Step Solution

Computation of the standard cost

Standard Cost Card

Inputs

Standard Quantity

Standard Price ($)

Standard Cost per unit ($)

Direct Material

3

1.05

3.15

Direct Labor

2

10.50

21.00

Variable Manufacturing Overhead

2

5.00

10.00

Total standard cost per unit

34.15

Preparation of actual cost card

Actual Cost Card

Inputs

Standard Quantity

Standard Price ($)

Standard Cost per unit ($)

Direct Material

2,600

1.10

2,860

Direct Labor

1,800

10.00

18,0000

Actual Variable Overhead

1,700

Actual Fixed Overhead

7,300

Total standard cost

29,860

Actual cost per unit

29,860/1,000

29.86

Journal Entries

Journal Entry

Date

Particulars

Debit ($)

Credit ($)

1

Work In Progress Inventory

3,150

Direct Material Cost Variance

130

Direct Material Efficiency

420

Accounts Payable

2,860

(Direct Material used for production)

2

Work in Progress

21,000

Direct Labor Cost Variance

900

Direct Labor Efficiency variance

2,100

Direct Labor

18,000

(Direct labor cost incurred)

3

Manufacturing Overhead

9,000

Various Accounts (1,700+7,300)

9,000

(Manufacturing cost overhead cost incurred)

4

Work in Progress

10,000

Manufacturing Overhead

10,000

(Manufacturing cost allocated)

5

Finished Goods

34,150

Work in Progress

34,150

(WIP transferred to finished goods)

6

Cost of goods sold

34,150

Finished Goods

34,150

(All the finished goods are sold)

7

Variable Overhead cost variance

1,500

Fixed Overhead Cost Variance

600

Manufacturing Overhead

1,000

Variable Overhead Efficiency Variance

1,500

Fixed Overhead Volume Variance

1,600

(Manufacturing overhead adjusted)

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