Question

Boron Chemical Company produces a synthetic resin that is used in the automotive industry. The company uses a standard cost system. For each gallon of output, the following direct manufacturing costs are anticipated:

Direct labor: 3.40 hours at $29.00 per hour	$	98.60
Direct materials: 3.40 gallons at $24.00 per gallon	$	81.60

During December of the current year, Boron produced a total of 2,640 gallons of output and incurred the following direct manufacturing costs:

Direct labor: 8,850 hours worked at an average wage rate of $20.90 per hour

Direct materials:

Purchased: 9,600 gallons @ $24.45 per gallon

Used in production: 9,100 gallons

Boron records price variances for materials at the time of purchase.

Required:

Prepare journal entries for the following events and transactions.

1. Purchase, on credit, of direct materials.

2. Direct materials issued to production.

3. Direct labor cost of units completed this period.

4. Direct manufacturing cost (direct labor plus direct materials) of units completed and transferred to Finished Goods Inventory.

5. Sale (on credit), for $290 per gallon, of 2,000 gallons of output. (Hint: You will need two journal entries here.).

Answer 1