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Basic Variance Analysis, Revision of Standards, Journal Entries

Petrillo Company produces engine parts for large motors. The company uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products $($a valve$)$ is as follows:

Direct materials $(7$ lbs$.$ @ $$5\mathrm{.}40)$$$37\mathrm{.}80$Direct labor $(1\mathrm{.}75$ hrs$.$ @ $$18)31\mathrm{.}50$Variable overhead $(1\mathrm{.}75$ hrs$.$ @ $$4\mathrm{.}00)7\mathrm{.}00$Fixed overhead $(1\mathrm{.}75$ hrs$.$ @ $$3\mathrm{.}00)5\mathrm{.}25$Standard cost per unit$$81\mathrm{.}55$

During the year, Petrillo had the following activity related to valve production:

Production of valves totaled $20,600$ units.

A total of $135,600$ pounds of direct materials was purchased at $$5\mathrm{.}36$ per pound.

There were $10,000$ pounds of direct materials in beginning inventory $($carried at $$5\mathrm{.}40$ per pound$).$ There was no ending inventory.

The company used $36,500$ direct labor hours at a total cost of $$656,270.$

Actual fixed overhead totaled $$110,000.$

Actual variable overhead totaled $$169,000.$

Petrillo produces all of its valves in a single plant. Normal activity is $20,000$ units per year. Standard overhead rates are computed based on normal activity measured in standard direct labor hours.

$2.$ Compute the dienct labor ralte and afficiency variantis.

$4.$ Compute overbead var iances using ai four$-$viriance arbalysis.

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b$.$ Aecord materiats uhaqe

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$5$

C$.$ Giverual alinarit Lahre

d$.$ Clowew materials usaige and labter variancouss to CGS

k$.$ Glowe spenting and afficisticy wariancis to CGS

$1.$ Glowe volume viriance to GGS