Managerial Accounting
3rd Edition
ISBN: 9780077826482
Author: Stacey M Whitecotton Associate Professor, Robert Libby, Fred Phillips Associate Professor
Publisher: McGraw-Hill Education
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Question
Chapter 9, Problem 3.2GAP
To determine
Concept introduction:
Direct labor variances:
Direct labor variances refer to the difference between the standard direct labor cost and actual direct labor cost incurred. Direct labor cost variances are categorized into following categories:
- Direct labor Rate variance: this variance shows the difference of standard rate and actual rate of labor. The formula to calculate this variance is as follows:
- Direct labor efficiency variance: this variance shows the difference of standard usage and actual usage of labor. The formula to calculate this variance is as follows:
- Direct labor cost or spending variance: this variance shows the difference of
standard cost and actual cost of labor. The formula to calculate this variance is as follows:
Or
Direct Labor cost variance = Actual Labor cost − Standard Labor Cost
To indicate:
The
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Q.Prepare journal entries for manufacturing overhead costs and their variances
Computing and journalizing standard cost variances
McKnight manufactures coffee mugs that it sells to other companies for customizing with
their own logos. McKnight prepares flexible budgets and uses a standard cost system to
control manufacturing costs. The standard unit cost of a coffee mug is based on static budget
volume of 59,800 coffee mugs per month:
Direct Materials (0.2 lbs. @ $0.25 per Ib.)
$ 0.05
Direct Labor (3 minutes @ $0.11 per minute)
0.33
Manufacturing Overhead:
Variable (3 minutes @ $0.06 per minute)
$ 0.18
Fixed (3 minutes @ $0.15 per minute)
0.45
0.63
Total Cost Per Coffee Mug
$ 1.01
Actual cost and production information for July 2020 follow:
а.
Actual production and sales were 62,500 coffee mugs.
b. Actual direct materials usage was 10,000 Ibs. at an actual cost of $0.17 per Ib.
Actual direct labor usage of 198,000 minutes at a cost of $25,740.
d. Actual overhead cost was $8,500 variable and $32,100 fixed.
e. Selling and administrative costs were $110,000.
C.
Q) Prepare journal entries for variable and fixed manufacturing overhead costs and variances;write off these variances to cost of goods sold.
Chapter 9 Solutions
Managerial Accounting
Ch. 9 - Briefly describe the difference between budgetary...Ch. 9 - What are standard costs? When are they set?Ch. 9 - Prob. 3QCh. 9 - Prob. 4QCh. 9 - Prob. 5QCh. 9 - Prob. 6QCh. 9 - Prob. 7QCh. 9 - Prob. 8QCh. 9 - Prob. 9QCh. 9 - How do the master budget, flexible budget, and...
Ch. 9 - Prob. 11QCh. 9 - What type of variance is calculated by comparing...Ch. 9 - Prob. 13QCh. 9 - Prob. 14QCh. 9 - Prob. 15QCh. 9 - Prob. 16QCh. 9 - Prob. 17QCh. 9 - Prob. 18QCh. 9 - What are the two variable overhead variances? What...Ch. 9 - Prob. 20QCh. 9 - Prob. 21QCh. 9 - Prob. 22QCh. 9 - Prob. 23QCh. 9 - Prob. 1MCCh. 9 - Prob. 2MCCh. 9 - Variances are always noted as favorable or...Ch. 9 - What type of budget is ail integrated set of...Ch. 9 - Prob. 5MCCh. 9 - Prob. 6MCCh. 9 - Prob. 7MCCh. 9 - Prob. 8MCCh. 9 - Prob. 9MCCh. 9 - Prob. 10MCCh. 9 - Prob. 1MECh. 9 - Creating Grading Scale Based on Ideal, Tight but...Ch. 9 - Prob. 3MECh. 9 - Prob. 4MECh. 9 - Calculating Unknown Values for Direct Labor...Ch. 9 - Prob. 6MECh. 9 - Prob. 7MECh. 9 - Prob. 8MECh. 9 - Prob. 9MECh. 9 - Prob. 10MECh. 9 - Prob. 11MECh. 9 - Prob. 12MECh. 9 - Preparing Journal Entries to Record Direct Labor...Ch. 9 - Prob. 1ECh. 9 - Prob. 2ECh. 9 - Interpreting Direct Materials Price, Quantity...Ch. 9 - Calculating Direct Materials and Direct Labor...Ch. 9 - Calculating Direct Materials and Direct Labor...Ch. 9 - Prob. 6ECh. 9 - Prob. 7ECh. 9 - Prob. 8ECh. 9 - Prob. 9ECh. 9 - Preparing Journal Entries to Record Direct...Ch. 9 - Prob. 11ECh. 9 - Calculating Fixed Manufacturing Overhead Spending,...Ch. 9 - Prob. 13ECh. 9 - Prob. 14ECh. 9 - Prob. 15ECh. 9 - Prob. 16ECh. 9 - Prob. 17ECh. 9 - Determining Actual, Standard Costs, and Variances...Ch. 9 - Prob. 1.1GAPCh. 9 - Prob. 1.2GAPCh. 9 - Prob. 1.3GAPCh. 9 - Prob. 2.1GAPCh. 9 - Prob. 2.2GAPCh. 9 - Prob. 2.3GAPCh. 9 - Prob. 3.1GAPCh. 9 - Prob. 3.2GAPCh. 9 - Prob. 3.3GAPCh. 9 - Prob. 4GAPCh. 9 - Prob. 5.1GAPCh. 9 - Prob. 5.2GAPCh. 9 - Prob. 5.3GAPCh. 9 - Prob. 6.1GAPCh. 9 - Prob. 6.2GAPCh. 9 - Prob. 6.3GAPCh. 9 - Prob. 7.1GAPCh. 9 - Prob. 7.2GAPCh. 9 - Prob. 7.3GAPCh. 9 - Preparing Journal Entries to Record Fixed...Ch. 9 - Prob. 9.1GAPCh. 9 - Prob. 9.2GAPCh. 9 - Prob. 10.1GAPCh. 9 - Prob. 10.2GAPCh. 9 - Prob. 1.1GBPCh. 9 - Prob. 1.2GBPCh. 9 - Prob. 1.3GBPCh. 9 - Prob. 2.1GBPCh. 9 - Prob. 2.2GBPCh. 9 - Prob. 2.3GBPCh. 9 - Prob. 3.1GBPCh. 9 - Prob. 3.2GBPCh. 9 - Prob. 3.3GBPCh. 9 - Prob. 4GBPCh. 9 - Prob. 5.1GBPCh. 9 - Prob. 5.2GBPCh. 9 - Prob. 5.3GBPCh. 9 - Prob. 6.1GBPCh. 9 - Prob. 6.2GBPCh. 9 - Prob. 6.3GBPCh. 9 - Prob. 7.1GBPCh. 9 - Prob. 7.2GBPCh. 9 - Prob. 7.3GBPCh. 9 - Prob. 8GBPCh. 9 - Prob. 9.1GBPCh. 9 - Prob. 9.2GBPCh. 9 - Calculating Variable Manufacturing Overhead, Fixed...Ch. 9 - Prob. 9.4GBPCh. 9 - Prob. 9.5GBPCh. 9 - Prob. 9.6GBPCh. 9 - Prob. 10.1GBPCh. 9 - Prob. 10.2GBP
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- If variances are recorded in the accounts at the time the manufacturing costs are incurred, what does a debit balance in Direct Materials Price Variance represent?arrow_forwardKamen Manufacturing Co. estimates the following labor and overhead costs for the period: Required: Use the four-variance method for overhead analysis. Calculate the variances for direct labor and overhead. Prove that the overhead variances equal over- or underapplied factory overhead for the period.arrow_forwardRefer to the information for Deporte Company above. Required: 1. Prepare a journal entry for the purchase of raw materials. 2. Prepare a journal entry for the issuance of raw materials. 3. Prepare a journal entry for the addition of labor to Work in Process. 4. Prepare a journal entry for the closing of variances to Cost of Goods Sold.arrow_forward
- Calculate the manufacturing overhead variance for Harriott and state the journal entries necessary to dispose of the variance.arrow_forwardInstruction: a. Compute for the factory overhead variance b. Make the journal entries that relate to the factory overhead 19F.arrow_forwardPrepare summarized journal entries to record both the actual costs and standard costs for direct materials and conversion costs, including the variances for both production costs.arrow_forward
- Assuming the amount is material, the disposition of overhead variance should be allocated pro rata to the following, except: A Raw materials inventory B Cost of goods sold Work in process inventory Finished goods inventoryarrow_forwardBriefly describe various variances relating to factory overheads. How material, labor and overhead variances calculated and recorded?arrow_forwardUnder Standard Costing System, direct material price variance shall be appropriately computed using A. Actual direct materials usedB. Actual direct materials purchasedC. Actual direct materials wastedD. Actual direct materials converted to work in processarrow_forward
- I need help with parts B & C please!! REQUIRED C. Record entry for direct material costs payable and material variances. Record entry for direct labor costs payable and labor variances. Record the entry for variable overhead applied. Record the entry for variable overhead payable. Record the variable overhead variances. Record the entry for fixed overhead applied. Record the entry for fixed overhead payable. Record the fixed overhead variances. Record entry to transfer finished goods to inventory. Record sales on accounts. Record cost of goods sold. Record the disposition of variances to cost of goods sold.arrow_forwarda. Compute the direct material price and efficiency variances. b. (Appendix) Prepare the journal entries to record the purchase and use of the direct materials using standard costing. Complete this question by entering your answers in the tabs below. Required A Required B (Appendix) Prepare the journal entries to record the purchase and use of the direct materials using standard costing. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. View transaction list Journal entry worksheet < A Record the purchase and use of the direct materials using standard costing. Note: Enter debits before credits. Event 1 General Journal Debit Creditarrow_forwardRequired information [The following information applies to the questions displayed below.] Alvarez Company for the current period shows a $28,000 favorable volume variance and a $69,000 unfavorable controllable variance. Standard overhead applied for the period is $228,000. a. What is the actual total overhead cost incurred for the period? b. What is the total overhead variance and is it favorable or unfavorable? a. Actual total overhead b. Total overhead variance S 269,000arrow_forward
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