Question

Hart Company made 5,000 bookshelves using 32,000 board feet of wood costing $384,000. The company's direct materials standards for one bookshelf are 7 board feet of wood at $11.90 per board foot. Exercise 23-14A Materials variances recorded and closed LO P5 Hart Company records standard costs in its accounts and its materials variances in separate accounts when it assigns materials costs to the Work in Process Inventory account. (1) Prepare the journal entry that both charges the direct materials costs to the Work in Process Inventory account and records the materials variances in their proper accounts. (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.

Answer 1

• All working forms part of the answer
• Calculation of Variances:

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                     11.90	-	$                    12.00	)	x	32000
	-3200
	Variance		$              3,200.00			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	35000	-	32000	)	x	$                        11.90
	35700
	Variance		$            35,700.00			Favourable-F

• Requirement 1

Accounts title	Debit	Credit	Working
Work In Process	$                      416,500.00		[5000 shelves x 7 board feet x $ 11.90 per feet]
Material Price Variance	$                           3,200.00		[ ($ 12 - $ 11.90) x 32000 feet]
Material Quantity Variance		$                                       35,700.00	[ (7 feet x 5000 shelves) - 32000 feet] x $ 11.90
Cash		$                                     384,000.00	[Cost of purchase]
(variances recorded)

• Requirement 2

Accounts title	Debit	Credit	Working
Material Quantity Variance	$                         35,700.00		[earlier credited]
Cost of Goods Sold		$                                       32,500.00	[$ 35700 - 3200]
Material Price Variance		$                                         3,200.00	[earlier debited]
(variance account closed)