Question

Slick Corporation is a small producer of synthetic motor oil. During May, the company produced 5,000 cases of lubricant. Each case contains 12 quarts of synthetic oil. To achieve this level of production, Slick purchased and used 16,500 gallons of direct materials at a cost of $20,774. It also incurred average direct labor costs of $14 per hour for the 4,160 hours worked in May by its production personnel. Manufacturing overhead for the month totaled $9,743, of which $2,200 was considered fixed. Slick's standard cost information for each case of synthetic motor oil is as follows.

Direct materials standard price	$	1.30	per gallon
Standard quantity allowed per case		3.25	gallons
Direct labor standard rate	$	16	per hour
Standard hours allowed per case		0.75	direct labor hours
Fixed overhead budgeted	$	2,600	per month
Normal level of production		5,200	cases per month
Variable overhead application rate	$	1.50	per case
Fixed overhead application rate ($2,600 ÷ 5,200 cases)		0.50	per case
Total overhead application rate	$	2.00	per case

Required:

a. Compute the materials price and quantity variances.

b. Compute the labor rate and efficiency variances.

c. Compute the manufacturing overhead spending and volume variances.

d. Prepare the journal entries to:

1. Charge materials (at standard) to Work in Process.

2. Charge direct labor (at standard) to Work in Process.

3. Charge manufacturing overhead (at standard) to Work in Process.

4. Transfer the cost of the 5,000 cases of synthetic motor oil produced in May to Finished Goods.

5. Close any over- or underapplied overhead to cost of goods sold.

Answer 1

Actual Cost				Standard Cost
AQ	x	AP	AQ	x	SP	SQ	x	SP
16,500	x	1.26	16,500	x	$1.30	16,250	x	$1.30
	$20,774			$21,450		5000*3.25	$21,125
	($676)		($325)
Direct materials price variance	676	Favorable
Direct materials quantity variance	325	Unfavorable
Total direct materials variance	$351	Favorable
Actual Cost				Standard Cost
AH		AR	AH		SR	SH		SR
4,160		$14.00	4160		$16.00	3,750		$16.00
	$58,240			$66,560		5000*0.75	$60,000
	$8,320		($6560)
Direct labor rate variance	8320	Favorable
Direct labor efficiency variance	6560	Unfavorable
Total direct labor variance	$1,760	Favorable

Overhead budgeted for actual production
(5,000 cases):
Fixed	$    2,600
Variable ($1.5 per unit × 5,000 cases)	7,500
Overhead per flexible budget		$ 10,100
Actual overhead		9,743
Overhead spending variance—favorable		357
Volume variance:
Overhead applied to Work in Process
Inventory at standard
cost (5,000 cases × $2.00/case)		$ 10,000
Less: Budgeted overhead for 5,000		10,100
unit production level
Volume variance (unfavorable)		$      (100)

Transaction	General Journal	Debit	Credit
1	Work in process inventory	21,125
	Materials quantity variance	325
	Materials price variance		676
	Direct materials inventory		20,774
2	Work in process inventory	60,000
	Labor efficiency variance	6560
	Labor rate variance		8,320
	Direct labor payable		58,240
3	Work in process inventory	10,000
	Overhead volume variance	100
	Overhead spending variance		357
	Manufacturing overhead		9,743
4	Finished goods inventory	91,125
	Work in process inventory		91,125
5	Overhead spending variance	357
	Overhead volume variance		100
	Cost of goods sold		257
Note: I have provided last entry as per your image shown, but I think this entry would be correct
for No .5
5	Overhead spending variance	257
	Cost of goods sold		257

if any doubts please mention in comment