Question Content Area

Unit Costs, Multiple Products, Variance Analysis, Journal Entries

Business Specialty, Inc., manufactures two staplers: small and regular. The standard quantities of direct labor and direct materials per unit for the year are as follows:

$$SmallRegularDirect materials $($oz$.)6\mathrm{.}010\mathrm{.}00$Direct labor $($hrs$.)0\mathrm{.}10\mathrm{.}15$

The standard price paid per pound of direct materials is $$1\mathrm{.}60.$ The standard rate for labor is $$8\mathrm{.}00.$ Overhead is applied on the basis of direct labor hours. A plantwide rate is used. Budgeted overhead for the year is as follows:

Budgeted fixed overhead$$360,000$Budgeted variable overhead$480,000$

The company expects to work $12,000$ direct labor hours during the year; standard overhead rates are computed using this activity level. For every small stapler produced, the company produces two regular staplers.

$$Actual operating data for the year are as follows:

Units produced: small staplers, $35,000$; regular staplers, $70,000.$

Direct materials purchased and used: $56,000$ pounds at $$1\mathrm{.}5513,000$ for the small stapler and $43,000$ for the regular stapler. There were no beginning or ending direct materials inventories.

Direct labor: $14,800$ hours$3,600$ hours for the small stapler and $11,200$ hours for the regular stapler. Total cost of direct labor: $$114,700.$

Variable overhead: $$607,500.$

Fixed overhead: $$350,000.$ Business Specialty, Inc.

Standard Cost Sheet Small staplers $2.$ Compute the direct materials price and usage variances for each product.

Prepare journal entries to record direct materials activity. If an amount box does not require an ent

$1.$

Materials purchase

$2.$

Materials usage

$3.$

Close materials variances to Cost of goods sold $3.$ Compute the direct labor rate and efficiency variances for each product.

Prepare journal entries to record direct labor activity. If required, round to the nearest dollar. If an amount box does not require an entry, leave it blank.

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Record labor

$2.$

$-$

Close labor variances $4.$ Compute the variances for fixed and variable overhead.

Prepare journal entries to record overhead activity. All variances are closed to Cost of Goods Sold. For compound entries, if an amount box does not require an entry, leave it blank.

$1.$

Apply variable overhead

$2.$

Apply fixed overhead

$3.$

Actual variable overhead

$4.$

Actual fixed overhead $4.1$

Actual fixed overhead

$5.$

Record fixed and variable overhead variances

$6.$

Close variable overhead variances

$7.$

Close fixed overhead variances