Patrick Co. produces computer desks and uses a standard cost system. Materials s
ID: 2562672 • Letter: P
Question
Patrick Co. produces computer desks and uses a standard cost system. Materials standards are 6.75 pounds of material at $10.70 per pound and 5.2 hours of labor at a standard wage rate of $11.70. During December, Patrick Co. produced and sold 3,100 desks. Material purchases totaled 20,755 pounds at a total cost of $230,608. Material usage totaled 20,970 pounds. Payroll totaled $205,134 for 17,220 hours worked. Patrick Co. does not maintain inventories other than direct materials. Prepare journal entries to record transactions, if no JE required, put it in the account field.
Explanation / Answer
* All values in $
Standard cost For one desk For 3100 desks Material cost (6.75 pounds * 10.70 ) 72.23 2,23,897.50 Labour cost (5.2 hours* 11.70) 60.84 1,88,604.00 Total Standard cost 133.07 4,12,501.50 Journal Entries (i) Recording actual costs 1 Material cost 2,30,608.00 To Trade Payables 2,30,608.00 2 Labour cost 2,05,134.00 To Payroll payable 2,05,134.00 (ii) Recording profit or loss based on standards 3 Profit and Loss account (230608-223897.50) 6,710.50 To Material cost 6,710.50 4 Profit and Loss account (205134-188604) 16,530.00 To Labour cost 16,530.00