Refer to the Groovy Bottles Data Set in E10-53B. The standard predetermined variable manufacturing overhead rate is $7.05 and the standard predetermined fixed manufacturing overhead rate is $3.05. Use a standard cost accounting system to do the following:
In Exercise Groovy Bottles is a manufacturer of ceramic bottles. The company has the following standards:
Direct materials (clay)....................... 1.3 kg per bottle, at a cost of $0.40 per kg
Direct labour...................................... 1/5 hour per bottle, at a cost of $14.80 per hour
Static budget variable overhead............................ $70,500
Static budget fixed overhead ................................. $30,500
Static budget direct labour hours................................. 10,000 hours
Static budget number of bottles.................................... 52,000
Groovy Bottles allocates manufacturing overhead to production based on standard direct labour hours. Last month the company reported the following actual results for the production of 69,000 bottles:
Direct materials........................................ 1.5 kg per bottle, at a cost of $0.70 per kg
Direct labour............................................. 1/4 hour per bottle, at a cost of $12.90 per hour
Actual variable overhead.......................... $104,600
Actual fixed overhead .............................. $ 28,700
Requirements
1. Record Groovy Bottles’ direct materials and direct labour journal entries.
2. Record Groovy Bottles’ journal entries for manufacturing overhead, including the entry that records the overhead variances and closes the manufacturing overhead account.
3. Record the journal entries for the completion and sale of the 69,000 bottles, assuming that Groovy Bottle sold (on account) all of the 69,000 bottles at a sale price of $8.70 each (there were no beginning or ending inventories).