Question

Hart Company made 3,080 bookshelves using 22,080 board feet of wood costing $276,000. The company's direct materials standards for one bookshelf are 8 board feet of wood at $12.40 per board foot.

Exercise 23-14A Recording and closing materials variances LO P6

Hart Company uses a standard costing system.

(1) Prepare the journal entry to charge direct materials costs to Work in Process Inventory and record the materials variances.
(2) Assume that Hart's materials variances are the only variances accumulated in the accounting period and that they are immaterial. Prepare the adjusting journal entry to close the variance accounts at period-end.

Record price and quantity variances.

Record closing of price and quantity variances to cost of goods sold.

Answer 1

Std qty allowed(3080*8)	24640
Std price			12.4
Actual qty			22080
Actual price (276000/22080)	12.5
Material price variance = Actual qty (Std price - Actual price)
		22080(12.40-12.50) = 2208 Unfav
Material Qyty variance = Std price (Std qty - Actual qty)
		12.40 (24640-22080) = 31744 Fav
Journal entries
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Work in process inventory (24640*12.40)	305536
	Material price variance		2208
	Material qty variance			31744
	Accounts payable				276000
	(for material charged)
b.	Material Qty variance		31744
	Material price variance			2208
	Cost of goods sold				29536
	(for variance closed)