Question

Hart Company made 3,500 bookshelves using 26,000 board feet of wood costing $327,600. The company's direct materials standards for one bookshelf are 8 board feet of wood at $12.50 per board foot.

Hart Company records standard costs in its accounts and its materials variances in separate accounts when it assigns materials costs to the Work in Process Inventory account.

(1) Prepare the journal entry that both charges the direct materials costs to the Work in Process Inventory account and records the materials variances in their proper accounts.
(2) Assume that Hart's materials variances are the only variances accumulated in the accounting period and that they are immaterial. Prepare the adjusting journal entry to close the variance accounts at period-end.

Answer 1

1
	Debit	Credit
Work in process inventory	350000		=3500*8*12.5
Direct materials price variance	2600		=327600-(26000*12.5)
Direct materials quantity variance		25000	=12.5*(26000-3500*8)
Raw materials inventory		327600
2
	Debit	Credit
Direct materials quantity variance	25000
Direct materials price variance		2600
Cost of goods sold		22400