Show all work for obtaining journal entries Problem #1: Standard Costing Ultra,
ID: 2598317 • Letter: S
Question
Show all work for obtaining journal entries
Problem #1: Standard Costing Ultra, Inc. manufactures and sells a full line of sunglasses. The company uses a standard cost system. Department managers' are held responsible for the explanation of the variances in their department performance reports. Recently, the variances in the Prestige line of sunglasses have been of concern. Data for the month of August is presented below. Assume beginning and ending inventory levels for WiP and FG are zero. Static Bud $600,000 $150,000 $135,000 $114,000 $201,000 tual $575,000 $145,000 $142,000 $111,000 $177,000 revenues DM DL FOH (cost driver gross profit DL hours) selling price per Prestige sunglass DM (total # ounces) DL rate (S per DL hour) $76.923 15,600 $18.00 $78.767 16,000 $14.20Explanation / Answer
Static budget is based on 7800 sunglasses (600000/76.923) Standard cost data: Direct materal price per ounce=150000/15600=$9.62 per ounce Ounce required per sunglasses=15600/7800=2 ounce Hours required for 7800 sunglasses=135000/18=7500 hours Hours required for 1 sunglass=7500/7800=7500 hours=0.96 hours Fixed overhead absorption rate=114000/7500=$15.2 per hour Actual cost data Actual units of sunglasses=575000/78.767=7300 sunglasses Actual hours=142000/14.20=10000 hours Direct materal price per ounce=145000/16000=$9.06 per ounce Standard quantity allowed for actual unit=7300*2=14600 ounce. Account titles Debit Credit 4) FOH expenses 111000 accounts payable 111000 (Actual fixed overhead incurred) mfg FOH control 111000 FOH expenses 111000 (Transferred to mfg FOH control account) WiP inventory (AH*FOH Rate) (10000*15.2) 152000 mfg FOH control 152000 (Applied fixed overhead) mfg FOH control 41000 FOH volume variance (Note:3) 38000 FOH spending variance (Note:4) 3000 (Recorded variance) Notes:1 Fixed overhead volume variance=Applied fixed overhead-Budgeted fixed overhead=(10000*15.2)-(114000)=38000 F Notes:2 Fixed overhead spending variance=Actual fixed overhead-Budgeted fixed overhead=111000-114000=3000 F