Question

Prepare journal entries and post them to T-accounts for all transactions in Exercise 7-25, including requirement 2. Summarize how these journal entries differ from the normal costing entries described in Chapter 5.
In exercise
Standards per Chair
Direct materials ........ 2square metres of input at $5 per square metre
Direct manufacturing labour ... 0.5 hours of input at $10 per hour
The following data were compiled regarding actual performance: actual output units (chairs) produced, 2,000; square metres of input purchased and used, 3,700; price per square metre, $5.10; direct manufacturing labour costs, $8,820; actual hours of input, 900; labour price per hour, $9.80.
REQUIRED
1. Show your computations on the price and efficiency variances for direct materials and for direct manufacturing labour. Give a plausible explanation of why the variances occurred.
2. Suppose 6,000 square metres of materials were purchased (at $5.10 per square metre) even though only 3,700 square metres were used. Suppose further that variances are identified with their most likely control point; accordingly, direct materials price variances are isolated and traced to the purchasing department rather than to the production department. Compute the price and efficiency variances under this approach.


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  • CreatedJuly 31, 2015
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