Question

In: Accounting

Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying...

Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established:

1

Direct materials (2.8 lbs. @ $0.80)

$2.24

2

Direct labor (0.75 hr. @ $7.8)

5.85

3

Standard prime cost

$8.09

During the year, 79,300 pounds of material were purchased and used for the changeover activity. There were 26,000 batches produced, with the following actual prime costs:

Direct materials $50,946

Direct labor (for 19,457 hrs.) $149,386

CHART OF ACCOUNTS
Deporte Company
General Ledger
ASSETS
110 Cash
120 Accounts Receivable
131 Supplies
132 Prepaid Insurance
141 Materials
142 Work in Process
143 Overhead Control
144 Finished Goods
170 Land
180 Equipment
181 Accumulated Depreciation
LIABILITIES
210 Accounts Payable
220 Accrued Payroll
230 Utilities Payable
240 Lease Payable
EQUITY
310 Common Stock
320 Retained Earnings
REVENUE
410 Sales
EXPENSES
510 Cost of Goods Sold
511 Materials Price Variance
512 Materials Usage Variance
513 Labor Efficiency Variance
514 Labor Rate Variance
520 Insurance Expense
530 Wages Expense
540 Supplies Expense
550 Utilities Expense
560 Depreciation Expense
590 Miscellaneous Expense

Prepare the Dec. 31 journal entries for the (1) purchase of raw materials, (2) issuance of raw materials, (3) addition of labor to Work in Process, and the (4) closing of variances to Cost of Goods Sold. Refer to the Chart of Accounts for the exact wording of account titles. Record each transaction as a compound entry.

PAGE 10

GENERAL JOURNAL

DATE ACCOUNT POST. REF. DEBIT CREDIT

1

2

3

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7

8

9

10

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Solutions

Expert Solution

Journal Entry
Date Particulars Dr. Amt. Cr. Amt.
1 Raw Materials      63,440.00 $0.80 X 79,300 lbs
Material Price Variance      12,494.00
Accounts Payable      50,946.00
(record the raw materials purcahsed)
2 Work in Process      58,240.00 $0.80 X 72,800 lbs
Material Usage Variance        5,200.00
Raw Materials      63,440.00 $0.80 X 79,300 lbs
(record the raw materials issued to WIP)
3 Work in Process    152,100.00 $7.8 X 19,500 hrs
Labor Rate Variance        2,378.60
Labor Efficiency Variance            335.40
Accrued Payroll    149,386.00
(record the Labor used in Production)
4 Material Price Variance      12,494.00
Labor Rate Variance        2,378.60
Labor Efficiency Variance            335.40
Material Usage Variance        5,200.00
Cost of Goods Sold      10,008.00
(record the closing of variances)
Material Price Variance = (SR - AR) X AQ
Material Price Variance = ($0.80 - $0.64) X 79,300 Pounds
Material Price Variance = $12,494 (F)
Material Usage Variance = (SQ - AQ) X SR
Material Usage Variance = (72,800 lbs - 79,300 lbs) X $0.80
Material Usage Variance = $5,200 (U)
Labor Rate Variance = (SR - AR) X AH
Labor Rate Variance = ($7.80 - $7.68) X 19,457 hrs
Labor Rate Variance = $2,378.60 (F)
Labor Efficiency Variance = (SH - AH) X SR
Labor Efficiency Variance = (19,500 hrs - 19,457 Hrs) X $7.80
Labor Efficiency Variance = $335.40 (F)

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