Question

The Bartlesville plant of Harmon Company produces an industrial chemical. At the beginning of the year,...

The Bartlesville plant of Harmon Company produces an industrial chemical. At the beginning of the year, the Bartlesville plant had the following standard cost sheet:

Direct Materials (10 lbs. @ $1.60) $16.00
Direct Labor (0.75 hours @ $18.00) $13.50
Fixed Overhead (0.75 hours @ $4.00) $3.00
Variable Overhead (0.75 hours @ $3.00) $2.25
Standard Cost per Unit $34.75

The Bartlesville plant computes its overhead rates using practical volume, which is 72,000 units. The actual results for the year are as follows:

a. Units produced: 70,000

b. Direct materials purchased: 744,000 pounds at $1.50

c. Direct materials used: 736,000 pounds

d. Direct labor: 56,000 hours a $17.90 per hour

e. Fixed Overhead: $214,000

f. Variable Overhead: $175,400

REQUIRED:

1. Compute price and efficiency variances for direct materials

2. Compure the direct labor price and labor efficiency variances

3. Compute the fixed overhead price and efficiency variances. Interpret the volume variance

4. Compute the variable overhead price and efficiency variances.

5. Prepare the journal entries for the following:

a. The purchase of direct materials

b. The issuance of direct materials to production ( Work in Process)

c. The addition of direct labor to Work in Process

d. The addition of overhead to Work in Process

e. The incurrunce of actual overhead costs.

f. Closing out of variances to Cost of Goods Sold.

Business   Accounting   
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Answer #1
Ans 1
a) Direct material Price variance in $
(AQ*AP)-(AQ*SP) 74400 F
(744000*1.5)-(744000*1,6) -74400
b) Direct material efficiency variance
SP*(AQ-SQ allowed) 70400 U
1.6*(744000-(70000*10))
ans 2
a
Direct labor rate variance
(AH*AR)-(AH*SR) 5600 F
(56000*17.9)-(56000*18) -5600
Direct labor efficiency variance
SR*(AH-SH allowed) 63000 U
18*(56000-(70000*.75)
ans 3
Fixed overhead budget variance (price)
Actual-Budget 2000 F
214000-(72000*3) -2000
Fixed overhead efficiency variance 4000 U
Actual-flexible overhead
214000-(70000*3))
Fixed overhead volume variance
Absorbed-Budgetd 6000 U
(70000*.75*4)-(72000*3) -6000
ans 5 Accounts title Dr Cr
a Raw material Inventory 1116000
Accounst Payable 1116000
b Work in process (70000*10*1.6) 1120000
Raw material Inventory 1120000
c Work in process (70000*.75*18) 945000
Raw material Inventory 945000
d Work in process (70000*.75*(3+4)) 367500
Factory overhead 367500
e Factory overhead 389400
Work in process (214000+175400) 389400
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