Question

Jorgensen Corporation uses standard costs with its job order cost accounting system. In January, an order (Job No. 12) for 2,000 units of Product B was received. The standard cost of one unit of Product B is as follows.

Direct materials		3 pounds at $1.00 per pound		$3.00
Direct labor		1.10 hour at $8.00 per hour		8.80
Overhead		2 hours (variable $4.40 per machine hour; fixed $3.30 per machine hour)		15.40
Standard cost per unit				$27.20

Normal capacity for the month was 4,310 machine hours. During January, the following transactions applicable to Job No. 12 occurred.

1.		Purchased 6,200 pounds of raw materials on account at $1.04 per pound.
2.		Requisitioned 6,200 pounds of raw materials for Job No. 12.
3.		Incurred 2,320 hours of direct labor at a rate of $7.90 per hour.
4.		Worked 2,320 hours of direct labor on Job No. 12.
5.		Incurred manufacturing overhead on account $32,100.
6.		Applied overhead to Job No. 12 on basis of standard machine hours allowed.
7.		Completed Job No. 12.
8.		Billed customer for Job No. 12 at a selling price of $190,000.

a) Prepare the entry to recognize the total overhead variance. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit

b) Prepare the January 2020 income statement for management. Assume selling and administrative expenses were $2,300.

                 JORGENSEN CORPORATION
                         Income Statement / Date

			$

	$

$

Answer 1

a).

Accounts title and explanation	debit($)	credit($)
Overhead variance (32,100-30,800)	1300
Manufacturing overhead		1300

b).

JORGENSEN CORPORATION

INCOME STATEMENT for January 2021

Sales revenue		$190,000
Cost of goods sold (2000*27.2)		$54,400
Gross profit standard		$135,600
Material price variance. (6200*(1.04-1))	248 F
Material quantity variance. ((6200-6000)*1)	200 F
Labour rate variance. ((8.8-7.9)*2320)	(2088) U
Labour quantity variance. ((2320-2000)*8.8)	2816 F
Overhead variance((2000*(4.4+3.3))	30800 F
Total variance		$ 31,976
Gross profit actual		$ 167,576
Selling and adminstration expenses		$ 0
Net income		$ 167,576