The following information concerns Pacific Manufacturing Company, which manufactures a single product called Westco. The standard cost

Question:

The following information concerns Pacific Manufacturing Company, which manufactures a single product called Westco. The standard cost card for Westco follows:
Material A: 1 unit at $14 $14
Material B: 6 units at $2 12
Direct labor: 1/2 hour at $10 5
Variable factory overhead: 1/3 machine hour at $3 1
Fixed factory overhead: 1/3 machine hour at $24 8
$40
Other information available for the year ending December 31, 20A, includes the following:
(a) Materials price variances are recorded when the materials are purchased. Transactions related to materials are as follows:

(b) Beginning work in process contained 6,000 units of Westco, complete with respect to material A, 2/3 complete with respect with respect to material B, 1/2 complete with respect to direct labor, and 2/3 complete with respect to machining.
(c) Ending work in process contains 5,000 units of Westco, complete with respect to material A, 1/2 complete with respect to material B, 1/4 complete with respect to direct labor, and 1/2 complete with respect to machining.
(d) 15,000 units of Westco were completed and transferred to finished goods during the period. There were 4,000 units of Westco in finished goods at the beginning of the period and 3,600 units at the end of the period. Westco sells for $60 a unit.
(e) During the period, 6,500 direct labor hours were worked at a total cost of $71,500.
(f) Production machining time totaled 4,400 hours. The standard factory overhead rate is determined on the basis of a normal operating capacity of 5,000 machine hours.
(g) Actual factory overhead for the period totaled $122,000.
(h) Marketing and administrative expenses for the period totaled $120,000, and the effective income tax rate is 30%.
Required:
(1) Prepare journal entries to record the purchase and issue of materials, the production charge for labor and factory overhead, and the closing of the two factory overhead accounts (Factory Overhead Control and Applied Factory Overhead), along with the appropriate standard cost variances. Use the three-variance method for factory overhead.
(2) Prepare the journal entry to close the variance accounts into Income Summary.
(3) Prepare an income statement for the year ending December 31, 20A.