Question

Heritage Furniture Co. uses a standard cost system. One of the company’s most popular products is an oak entertainment center that looks like an old icebox but houses a television, stereo, or other electronic components. The per-unit standard costs of the entertainment center, assuming a “normal” volume of 1,000 units per month, are as follows. Direct materials, 100 board-feet of wood at $1.30 per foot $ 130.00 Direct labor, 5 hours at $8.00 per hour 40.00 Manufacturing overhead (applied at $22 per unit) Fixed ($15,000 ÷ 1,000 units of normal production) $ 15.00 Variable 7.00 22.00 Total standard unit cost $ 192.00 During July, 800 entertainment centers were scheduled and produced at the following actual unit costs. Direct materials, 110 feet at $1.20 per foot $ 132.00 Direct labor, 5 1/2 hours at $7.80 per hour 42.90 Manufacturing overhead, $18,480 ÷ 800 units 23.10 Total actual unit cost $ 198.00 Required: a-1. Compute the materials price variance for the month of July. a-2. Compute the materials quantity variance for the month of July. a-3. Compute the labor rate variance for the month of July. a-4. Compute the labor efficiency variance for the month of July. a-5. Compute the overhead spending variance for the month of July. a-6. Compute the overhead volume variance for the month of July. b. Prepare journal entries to assign manufacturing costs to the Work in Process Inventory account and to record cost variances for July. Use separate entries for (1) direct materials, (2) direct labor, and (3) overhead costs.

Answer 1