Variances and Journal Entries Jacobs Company manufactures a single product and uses a standard costing system. The nature of its product dictates that it be sold in the period it is produced. Thus, no ending work in process or finished goods inventories remain at the end of the period. However, raw materials be stored and are purchased in bulk when prices are favorable. Per-unit standard product costs are material, $8.40 (4 pounds); labor, $6.40 (0.5 hour); and variable overhead, $4.40 (based on direct labor hours). Budgeted fixed overhead is $54,000. Jacobs accounts for all inventories and cost of goods sold at standard cost and records each variance in a separate account. The following data relate to May when 17,700 finished units were produced. a. Assume Jacobs purchased 69,000 pounds of r materials on account at $2.60 per pound and used 67,000 pounds in May's production, prepare a journal entry to record the purchase of raw materials and a separate journal entry to record the use of raw materials in production. Record these entries using standard costs and include the appropriate materials variances. General Journal Description Work in process inventory Debit Credit 0 0 ° 0 ° 0 ° Materials price variance To record the purchase of direct materials Materials inventory = 0 0 ÷ 0 0 0 0 To record the use of direct materials b. Assuming employees worked 8,900 direct labor hours at an average hourly rate of $12.10, prepare a journal entry to record actual costs, standard costs, and any labor variances. General Journal Description Work in process inventory Wages payable Debit Credit 0 = ° o 0 o To record direct labor costs c. Assuming Jacobs' actual and applied variable overhead was $79,400 and that budgeted and actual fixed overhead incurred was $54,000, prepare a journal entry to record actual and standard overhead costs and any overhead variances. General Journal Description Debit Credit Work in process inventory o Variable overhead spending variance D o ÷ 0 o 0 0 ° To record actual and standard overhead costs
Variances and Journal Entries Jacobs Company manufactures a single product and uses a standard costing system. The nature of its product dictates that it be sold in the period it is produced. Thus, no ending work in process or finished goods inventories remain at the end of the period. However, raw materials be stored and are purchased in bulk when prices are favorable. Per-unit standard product costs are material, $8.40 (4 pounds); labor, $6.40 (0.5 hour); and variable overhead, $4.40 (based on direct labor hours). Budgeted fixed overhead is $54,000. Jacobs accounts for all inventories and cost of goods sold at standard cost and records each variance in a separate account. The following data relate to May when 17,700 finished units were produced. a. Assume Jacobs purchased 69,000 pounds of r materials on account at $2.60 per pound and used 67,000 pounds in May's production, prepare a journal entry to record the purchase of raw materials and a separate journal entry to record the use of raw materials in production. Record these entries using standard costs and include the appropriate materials variances. General Journal Description Work in process inventory Debit Credit 0 0 ° 0 ° 0 ° Materials price variance To record the purchase of direct materials Materials inventory = 0 0 ÷ 0 0 0 0 To record the use of direct materials b. Assuming employees worked 8,900 direct labor hours at an average hourly rate of $12.10, prepare a journal entry to record actual costs, standard costs, and any labor variances. General Journal Description Work in process inventory Wages payable Debit Credit 0 = ° o 0 o To record direct labor costs c. Assuming Jacobs' actual and applied variable overhead was $79,400 and that budgeted and actual fixed overhead incurred was $54,000, prepare a journal entry to record actual and standard overhead costs and any overhead variances. General Journal Description Debit Credit Work in process inventory o Variable overhead spending variance D o ÷ 0 o 0 0 ° To record actual and standard overhead costs
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter11: Strategic Cost Management
Section: Chapter Questions
Problem 16E: Potter Company has installed a JIT purchasing and manufacturing system and is using back-flush...
Related questions
Concept explainers
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Topic Video
Question
Don't give solution in image format..
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Step 1: Define the term variance:
VIEWStep 2: a. Prepare the journal entry to record the purchase of direct material as follows:
VIEWStep 3: b. Pass the journal entry to record the direct labor as follows:
VIEWStep 4: c. Prepare the journal entry to record the actual and standard overhead cost as follows:
VIEWSolution
VIEWTrending now
This is a popular solution!
Step by step
Solved in 5 steps with 12 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning