Direct Materials, Direct Labor, and Overhead Variances, Journal Entries Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following standard cost sheet: Direct materials (5 lbs. @ $2.60) $13.00 Direct labor (0.75 hr. @ $18.00) 13.50 Fixed overhead (0.75 hr. @ $4.00) 3.00 Variable overhead (0.75 hr. @ $3.00) 2.25    Standard cost per unit $31.75 Algers computes its overhead rates using practical volume, which is 54,000 units. The actual results for the year are as follows: Units produced: 53,000 Direct materials purchased: 273,000 pounds at $2.50 per pound Direct materials used: 270,400 pounds Direct labor: 40,100 hours at $17.95 per hour Fixed overhead: $161,600 Variable overhead: $121,900 MPV = 27040 FAV MUV = 14040 = UNFAV LRV = 2005 FAV LEV = 6300 UN FIXED SPENDING VARIANCE = 400 FAV FIXED VOLUME VARIANCE = 3000 UNFAV VARIABLE SPENDING = 1600 UNFAV VARAIBLE EFFICIENCY = 1050  UNFAV  Required: 5. Prepare journal entries for the following: The purchase of direct materials The issuance of direct materials to production (Work in Process) The addition of direct labor to Work in Process The addition of overhead to Work in Process The incurrence of actual overhead costs If an amount box does not require an entry, leave it blank. f. Prepare journal entries for the closing out of variances to Cost of Goods Sold. If an amount box does not require an entry, leave it blank. First, close direct materials and direct labor variances: Second, recognize the overhead variances:If an amount box does not require an entry, leave it blank. Third, close the overhead variances:Note: Close the variances with a debit balance first. For compound entries, if an amount box does not require an entry, leave it blank.

Question

Direct Materials, Direct Labor, and Overhead Variances, Journal Entries

Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following standard cost sheet:

Direct materials (5 lbs. @ $2.60) $13.00
Direct labor (0.75 hr. @ $18.00) 13.50
Fixed overhead (0.75 hr. @ $4.00) 3.00
Variable overhead (0.75 hr. @ $3.00) 2.25
   Standard cost per unit $31.75

Algers computes its overhead rates using practical volume, which is 54,000 units. The actual results for the year are as follows:

  1. Units produced: 53,000
  2. Direct materials purchased: 273,000 pounds at $2.50 per pound
  3. Direct materials used: 270,400 pounds
  4. Direct labor: 40,100 hours at $17.95 per hour
  5. Fixed overhead: $161,600
  6. Variable overhead: $121,900

MPV = 27040 FAV

MUV = 14040 = UNFAV

LRV = 2005 FAV

LEV = 6300 UN

FIXED SPENDING VARIANCE = 400 FAV

FIXED VOLUME VARIANCE = 3000 UNFAV

VARIABLE SPENDING = 1600 UNFAV

VARAIBLE EFFICIENCY = 1050  UNFAV 

Required:

5. Prepare journal entries for the following:

  1. The purchase of direct materials
  2. The issuance of direct materials to production (Work in Process)
  3. The addition of direct labor to Work in Process
  4. The addition of overhead to Work in Process
  5. The incurrence of actual overhead costs

If an amount box does not require an entry, leave it blank.

f. Prepare journal entries for the closing out of variances to Cost of Goods Sold. If an amount box does not require an entry, leave it blank.

First, close direct materials and direct labor variances:

Second, recognize the overhead variances:
If an amount box does not require an entry, leave it blank.

Third, close the overhead variances:
Note: Close the variances with a debit balance first. For compound entries, if an amount box does not require an entry, leave it blank.

 

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