Chapter 14, Problem 48P

1. a

To determine

Calculate the direct labor efficiency variance and state whether it is favorable (F) or unfavorable (U).

Explanation of Solution

Calculate the direct labor efficiency variance and state whether it is favorable (F) or unfavorable (U).

$\begin{array}{c}\text{Direct}\text{labor}\text{efficiency}\text{variance}\text{=}\left[\text{Standard}\text{price}\text{×}\left(\begin{array}{l}\text{Actual}\text{quantity}\\ \text{×}\text{Standard}\text{quantity}\end{array}\right)\right]\\ \text{=}\left[\begin{array}{l}\text{\$18}\text{.20}\text{per}\text{hr}\text{×}\\ \left(\text{36,500}\text{hours}-\text{37,200}\text{hours}\right)\end{array}\right]\\ \text{=}\text{\$12,740F}\end{array}$

1. b

To determine

Calculate the direct labor rate variance and state whether it is favorable (F) or unfavorable (U).

Explanation of Solution

Calculate the direct labor rate variance and state whether it is favorable (F) or unfavorable (U).

$\begin{array}{c}\begin{array}{l}\text{Direct}\text{labor}\\ \text{rate}\text{variance}\end{array}\}\text{=}\left[\begin{array}{l}\left(\text{Actual}\text{price}\text{×}\text{Actual}\text{quantity}\right)-\\ \left(\text{Standard}\text{price}\text{×}\text{Actual}\text{quantity}\right)\end{array}\right]\\ \text{=}\text{\$600,000}-\left(\text{\$18}\text{.20}\text{per}\text{hr}\text{×}\text{36,500}\text{hours}\right)\\ \text{=}\text{\$64,300F}\end{array}$

1. c

To determine

Calculate the actual number of kilograms of material used in the production process during the month.

Explanation of Solution

Calculate the actual number of kilograms of material used in the production process during the month.

$\begin{array}{c}\begin{array}{l}\text{The actual number of kilograms }\\ \text{of material used}\text{in}\text{November}\end{array}\}\text{=}\left(\begin{array}{l}\text{Standard}\text{quantity}\text{allowed+}\\ \text{Efficiency}\text{variance}\end{array}\right)\\ \text{=}\text{51,200}\text{kg}\text{+}\left(\text{\$1,500}\text{÷}\text{\$5}\text{per}\text{kg}\right)\\ \text{=}\text{51,500kg}\text{.}\end{array}$

1. d

To determine

Calculate the actual price paid per kilogram of material during the month.

Explanation of Solution

Calculate the actual price paid per kilogram of material during the month.

$\begin{array}{c}\begin{array}{l}\text{Actual}\text{price}\text{per}\\ \text{kilogram}\text{(AP)}\end{array}\}\text{=}\left(\begin{array}{l}\text{Standard}\text{price}\text{per}\text{kg}\text{.(SP)}-\\ \text{Per}\text{unit}\text{favorable}\text{price}\text{variance}\end{array}\right)\\ \text{=}\text{\$5}\text{per}\text{kg}\left(\text{\$750}\text{÷}\text{50,000}\text{kgs}\right)\\ \text{=}\text{\$4}\text{.985}\end{array}$

Note: price variance is calculated at the point of purchase.

Working note:

(1)Calculate the direct materials purchase-price variance:

$\begin{array}{c}\begin{array}{l}\text{Direct materials }\\ \text{purchase-price variance}\end{array}\}\text{=}\left(\begin{array}{l}\text{Total}\text{direct}\text{materials}\text{variance}-\\ \text{Direct}\text{materials}\text{usage}\text{variance}\end{array}\right)\\ \text{=}\text{\$750U}-\text{\$1,500U}\\ \text{=}\text{\$750F}\end{array}$

1. e

To determine

Calculate the amount of direct materials cost and direct labor cost transferred to the finished goods inventory account during the end of the month.

Explanation of Solution

Calculate the amount of direct materials cost and direct labor cost transferred to the finished goods inventory account during the end of the month.

$\begin{array}{c}\begin{array}{l}\text{The amount of direct materials}\text{cost}\\ \text{ and direct labor cost transferred to }\\ \text{the finished goods inventory account }\\ \text{during}\text{November}\end{array}\}\text{=}\left(\begin{array}{l}\text{Standard}\text{manufacturing}\text{cost}\text{per}\text{unit}\text{×}\\ \text{Units}\text{manufactured}\text{in}\text{November}\end{array}\right)\\ \text{=}\left[\begin{array}{l}\left(\text{\$40}\text{+}\text{\$109}\text{.20}\text{per}\text{unit}\right)\\ \text{×}\text{5,600}\text{units}\end{array}\right]\\ \text{=}\text{\$835,520}\end{array}$

1. f

To determine

Calculate the total amount of direct materials cost and direct labor cost in the work-in-process inventory account during the end of the month.

Explanation of Solution

Calculate the total amount of direct materials cost and direct labor cost in the work-in-process inventory account during the end of the month.

	Materials	Labor	Total
Equivalent units in ending WIP inventory	800	600
Standard cost per equivalent unit	× $40	× $109.20
Ending inventory at standard cost	$32,000.00	$65,250	$97,520

Table (1)

2.

To determine

Prepare journal entries to record all transaction.

Explanation of Solution

Prepare journal entries to record all transaction.

Date	Account Title and Explanation	Debit ($)	Credit ($)
	Direct materials Inventory	$250,000
	Direct materials Purchase-price Variance		$750
	Accounts Payable (plug)		$249,250
	[Purchase of 50,000 kilograms of materials for $249,250 ($4.985 per kg.)]

Table (2)

Date	Account Title and Explanation	Debit ($)	Credit ($)
	Work-in-process inventory	$256,000
	Direct materials usage variance (plug)	$1,500
	Direct materials inventory		$257,500
	(Issued 51,500 kilograms of material to produce 6,400 equivalent units)

Table (3)

Date	Account Title and Explanation	Debit ($)	Credit ($)
	Work-in-process inventory	$677,040
	Direct labor rate variance		$64,300
	Direct labor efficiency  variance		$12,740
	Accrued payroll		$600,000
	(To record direct labor wages and standard direct labor cost incurred to manufacture 6,200 equivalent units)

Table (3)