Frio Company uses standard costs with its job order cost accounting system. In January, an order (Job No. 84) was received for 5,500 units of Product D. The standard cost of 1 unit of Product D is as follows.
Direct materials—1.5 pounds at $4.00 per pound ...$ 6.00
Direct labor—1 hour at $9.00 per hour ........9.00
Overhead—1 hour (variable $7.40; fixed $8.00) .....15.40
Standard cost per unit ...............$30.40
Overhead is applied on the basis of direct labor hours. Normal capacity for the month of January was 6,000 direct labor hours. During January, the following transactions applicable to Job No. 84 occurred.
1. Purchased 8,100 pounds of raw materials on account at $3.70 per pound.
2. Requisitioned 8,100 pounds of raw materials for production.
3. Incurred 5,200 hours of direct labor at $9.20 per hour.
4. Worked 5,200 hours of direct labor on Job No. 84.
5. Incurred $87,500 of manufacturing overhead on account.
6. Applied overhead to Job No. 84 on the basis of direct labor hours.
7. Transferred Job No. 84 to finished goods.
8. Billed customer for Job No. 84 at a selling price of $270,000.
Instructions
(a) Journalize the transactions.
(b) Post to the job order cost accounts.
(c) Prepare the entry to recognize the total overhead variance.
(d) Prepare the January 2014 income statement for management. Assume selling and administrative expenses were $60,000.