equired: 1. Compute price and usage variances for direct materials. MPV $fill in the blank 2ca867fec065065_1 MUV $fill in the blank 2ca867fec065065_3 2. Compute the direct labor rate and labor efficiency variances. Labor Rate Variance $fill in the blank 2ca867fec065065_5 Labor Efficiency Variance $fill in the blank 2ca867fec065065_7 3. Compute the fixed overhead spending and volume variances.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Direct Materials, Direct Labor, and Overhead Variances,
Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following
| 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: 275,000 pounds at $2.50 per pound
- Direct materials used: 270,400 pounds
- Direct labor: 40,100 hours at $17.95 per hour
- Fixed overhead: $161,700
- Variable overhead: $122,000
Required:
1. Compute price and usage variances for direct materials.
| MPV | $fill in the blank 2ca867fec065065_1 | |
| MUV | $fill in the blank 2ca867fec065065_3 |
2. Compute the direct labor rate and labor efficiency variances.
| Labor Rate Variance | $fill in the blank 2ca867fec065065_5 | |
| Labor Efficiency Variance | $fill in the blank 2ca867fec065065_7 |
3. Compute the fixed overhead spending and volume variances.
| Spending Variance | $fill in the blank 2ca867fec065065_9 | |
| Volume Variance | $fill in the blank 2ca867fec065065_11 |
4. Compute the variable overhead spending and efficiency variances.
| Spending Variance | $fill in the blank 2ca867fec065065_13 | |
| Efficiency Variance | $fill in the blank 2ca867fec065065_15 |
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.
| a. | fill in the blank 1674e5009fbaf82_2 | fill in the blank 1674e5009fbaf82_3 | |
| fill in the blank 1674e5009fbaf82_5 | fill in the blank 1674e5009fbaf82_6 | ||
| fill in the blank 1674e5009fbaf82_8 | fill in the blank 1674e5009fbaf82_9 | ||
| b. | fill in the blank 1674e5009fbaf82_11 | fill in the blank 1674e5009fbaf82_12 | |
| fill in the blank 1674e5009fbaf82_14 | fill in the blank 1674e5009fbaf82_15 | ||
| fill in the blank 1674e5009fbaf82_17 | fill in the blank 1674e5009fbaf82_18 | ||
| c. | fill in the blank 1674e5009fbaf82_20 | fill in the blank 1674e5009fbaf82_21 | |
| fill in the blank 1674e5009fbaf82_23 | fill in the blank 1674e5009fbaf82_24 | ||
| fill in the blank 1674e5009fbaf82_26 | fill in the blank 1674e5009fbaf82_27 | ||
| fill in the blank 1674e5009fbaf82_29 | fill in the blank 1674e5009fbaf82_30 | ||
| d. | fill in the blank 1674e5009fbaf82_32 | fill in the blank 1674e5009fbaf82_33 | |
| fill in the blank 1674e5009fbaf82_35 | fill in the blank 1674e5009fbaf82_36 | ||
| fill in the blank 1674e5009fbaf82_38 | fill in the blank 1674e5009fbaf82_39 | ||
| e. | fill in the blank 1674e5009fbaf82_41 | fill in the blank 1674e5009fbaf82_42 | |
| fill in the blank 1674e5009fbaf82_44 | fill in the blank 1674e5009fbaf82_45 | ||
| fill in the blank 1674e5009fbaf82_47 | fill in the blank 1674e5009fbaf82_48 |
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:
| fill in the blank d3cb9ffb2f9bfc7_2 | fill in the blank d3cb9ffb2f9bfc7_3 | ||
| fill in the blank d3cb9ffb2f9bfc7_5 | fill in the blank d3cb9ffb2f9bfc7_6 | ||
| fill in the blank d3cb9ffb2f9bfc7_8 | fill in the blank d3cb9ffb2f9bfc7_9 | ||
| fill in the blank d3cb9ffb2f9bfc7_11 | fill in the blank d3cb9ffb2f9bfc7_12 | ||
| fill in the blank d3cb9ffb2f9bfc7_14 | fill in the blank d3cb9ffb2f9bfc7_15 |
Second, recognize the overhead variances:
If an amount box does not require an entry, leave it blank.
| fill in the blank 8ca0ae038fe702f_2 | fill in the blank 8ca0ae038fe702f_3 | ||
| fill in the blank 8ca0ae038fe702f_5 | fill in the blank 8ca0ae038fe702f_6 | ||
| fill in the blank 8ca0ae038fe702f_8 | fill in the blank 8ca0ae038fe702f_9 | ||
| fill in the blank 8ca0ae038fe702f_11 | fill in the blank 8ca0ae038fe702f_12 | ||
| fill in the blank 8ca0ae038fe702f_14 | fill in the blank 8ca0ae038fe702f_15 | ||
| fill in the blank 8ca0ae038fe702f_17 | fill in the blank 8ca0ae038fe702f_18 |
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.
| fill in the blank 70802e073f8007b_2 | fill in the blank 70802e073f8007b_3 | ||
| fill in the blank 70802e073f8007b_5 | fill in the blank 70802e073f8007b_6 | ||
| fill in the blank 70802e073f8007b_8 | fill in the blank 70802e073f8007b_9 | ||
| fill in the blank 70802e073f8007b_11 | fill in the blank 70802e073f8007b_12 | ||
| fill in the blank 70802e073f8007b_14 | |||
| fill in the blank 70802e073f8007b_16 |
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