Question

Variances, Entries, and Income Statement
A summary of Martindale Company’s manufacturing variance report for May 2019 follows:

			Total Standard Costs (9,200 units)		Actual Costs (9,200 units)		Variances
Direct material			$38,640		$41,760		$3,120		U
Direct labor			193,200		191,760		1,440		F
Variable overhead			22,080		23,230		1,150		U
Fixed overhead			9,660		9,660		-
			$263,580		$266,410		$2,830		U

Standard materials cost per unit of product is 0.5 pounds at $8.40 per pound, and standard direct labor cost is 1.5 hours at $14.00 per hour. The total actual materials cost represents 4,800 pounds purchased at $8.70 per pound. Total actual labor cost represents 14,100 hours at $13.60 per hour. According to standards, variable overhead rate is applied at $1.60 per direct labor hour (based on a normal capacity of 15,000 direct labor hours or 10,000 units of product). Assume that all fixed overhead is applied to work-in-progress inventory.

a. Determine the following variances:

Do not use negative signs with any of your answers. Next to each variance answer, select either "F" for Favorable or "U" for Unfavorable.

Materials Variances
Actual cost:	Answer
Split cost:	Answer
Standard cost:	Answer
Materials price	Answer	AnswerFU
Materials efficiency	Answer	AnswerFU

Labor Variances
Actual cost:	Answer
Split cost:	Answer
Standard cost:	Answer
Labor rate	Answer	AnswerFU
Labor efficiency	Answer	AnswerFU

Variable Overhead Variances
Actual cost:	Answer
Split cost:	Answer
Standard cost:	Answer
Variable overhead spending	Answer	AnswerFU
Variable overhead efficiency	Answer	AnswerFU

b. Prepare general journal entries to record standard costs, actual costs, and related variances for material, labor, and overhead.

General Journal
Description		Debit	Credit
Materials inventory		Answer	Answer
AnswerAccounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory		Answer	Answer
AnswerAccounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory		Answer	Answer
To record the purches of direct materials
Work in process inventory		Answer	Answer
AnswerAccounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory		Answer	Answer
AnswerAccounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory		Answer	Answer
To record the use of direct materials
Work in process inventory		Answer	Answer
AnswerAccounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory		Answer	Answer
Labor rate variance		Answer	Answer
AnswerAccounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory		Answer	Answer
To record direct labor costs and related cost variances.
Work in process inventory		Answer	Answer
Variable overhead efficiency variance		Answer	Answer
AnswerAccounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory		Answer	Answer
AnswerAccounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory		Answer	Answer
To apply variable overhead to work in progress and record related cost variances
AnswerAccounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory		Answer	Answer
AnswerAccounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory		Answer	Answer
To apply fixed overhead to work in progress

c. Prepare journal entries to record the transfer of all completed units to Finished Goods Inventory and the subsequent sale of 8,400 units on account at $54 each (assume no beginning finished goods inventory).

General Journal
Description		Debit	Credit
AnswerAccounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory		Answer	Answer
AnswerAccounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory		Answer	Answer
To record completion ofunits
AnswerAccounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory		Answer	Answer
AnswerAccounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory		Answer	Answer
To record sale ofunits
AnswerAccounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory		Answer	Answer
AnswerAccounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory		Answer	Answer
To record cost ofunits

d. Prepare a partial income statement (through gross profit on sales) showing gross profit based on standard costs, the incorporation of variances, and gross profit based on actual costs.

Do not use negative signs with any of your answers below.

Martindale Company Partial Income Statement For the Month Ended May 31, 2019
Sales					Answer
Cost of goods at standard cost					Answer
Gross profit at standard cost					Answer
Net cost variance
Material				Answer
Labor				Answer
Variable overhead				Answer	Answer
Gross profit at actual cost					Answer

Answer 1