Smooth Corporation is a small producer of paint. During June, the company produced 10,000 cases of paint. Each case contains twelve quarts of paint. To achieve this level of production, Smooth purchased and used 34,000 gallons of direct materials at a cost of $43,520. It also incurred average direct labor costs of $14 per hour for the 8,300 hours worked in June by its production personnel. Manufacturing overhead for the month totaled $21,000, of which $4,500 was considered fixed. Smooth’s standard cost information for each case of paint is as follows:

Direct materials standard price . . . . . . . . . . . . . . . . . . . . $1.32 per gallon

Standard quantity allowed per case . . . . . . . . . . . . . . . . 3.00 gallons

Direct labor standard rate . . . . . . . . . . . . . . . . . . . . . . . . $15 per hour

Standard hours allowed per case . . . . . . . . . . . . . . . . . . . 0.80 direct labor hours

Fixed overhead budgeted . . . . . . . . . . . . . . . . . . . . . . . . $5,252 per month

Normal level of production . . . . . . . . . . . . . . . . . . . .. 10,100 cases per month

Variable overhead application rate . . . . . . . . . . . . . . . . $1.60 per case

Fixed overhead application rate

($5,252 ÷ 10,100 cases) . . . . . . . . . . . . . . . . . . . . . . . . 0.52 per case

Total overhead application rate . . . . . . . . . . . . . . . . . . . $2.12 per case

Instructions

a. Compute the materials price and quantity variances.

b. Compute the labor rate and efficiency variances.

c. Compute the manufacturing overhead spending and volume variances.

d. Prepare the journal entries to:

1. Charge materials (at standard) to Work in Process.

2. Charge direct labor (at standard) to Work in Process.

3. Charge manufacturing overhead (at standard) to Work in Process.

4. Transfer the cost of the 10,000 cases of paint produced in June to Finished Goods.

5. Close any over- or underapplied overhead to Cost of Goods Sold.