Question

Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller.

  

Direct Labor:	Direct Material:
Quantity, 0.23 hour	Quantity, 2 kilograms
Rate, $11.50 per hour	Price, $0.56 per kilogram

  

Actual material purchases amounted to 122,400 kilograms at $0.62 per kilogram. Actual costs incurred in the production of 36,000 units were as follows:

Direct labor:	$110,916 for 9,360 hours
Direct material:	$52,452 for 84,600 kilograms
1.Record the purchase of direct material on account and the direct-material purchase price variance. 2.Record the addition of direct-material cost to work-in-process inventory and the direct-material quantity variance. 3.Record the addition of direct-labor cost to work-in-process inventory and the direct-labor variances. 4.Record the closing of the direct-material and direct-labor variances to cost of goods sold.

Answer 1

Journal Entries
S. No.	Accounts Tittle	Debit	Credit
1	Raw Material inventory Dr (122400*$0.56)	$68,544
	Direct material price variance Dr (122400*$0.06)	$7,344
	To Cash (122400*$0.62)		$75,888
	To Record raw material purchased)
2	Work in Process Dr (36000*2*$0.56)	$40,320
	Direct material quantity variance Dr (12600*$0.56)	$7,056
	To Raw Material inventory (84600*$0.56)		$47,376
	(To recored consumption of raw material in to production)
3.1	Factory Wages Dr (9360*$11.50)	$1,07,640
	Direct labor rate variance Dr (9360*$0.35)	$3,276
	To Cash (9360*$11.85)		$1,10,916
	(Being labor cost incurred)
3.2	Work in Process Dr (36000*0.23*$11.50)	$95,220
	Direct labor efficiency variance Dr (1080*$11.50)	$12,420
	To Factory Wages (9360*$11.50)		$1,07,640
	(To direct labor used in production)
4	Cost of goods sold Dr	$30,096
	To Direct material price variance		$7,344
	To Direct material quantity variance		$7,056
	To Direct labor rate variance		$3,276
	To Direct labor efficiency variance		$12,420
	(Being direct material and direct labor variances closed to cost of goods sold)