Question

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 (2.4 lbs. @ $0.80) $1.92

2 Direct labor (0.80 hr. @ $7.4) 5.92

3. Standard prime cost $7.84

During the year, 71,550 pounds of material were purchased and used for the changeover activity. There were 27,000 batches produced, with the following actual prime costs:

Direct materials $45,967

Direct labor (for 21,555 hrs.) $156,871

Required:

1. Prepare a journal entry on Dec. 31 for the purchase of raw materials. Record the transaction as a compound entry.

2. Prepare a journal entry on Dec. 31 for the issuance of raw materials. Record the transaction as a compound entry.

3. Prepare a journal entry on Dec. 31 for the addition of labor to Work in Process. Record the transaction as a compound entry.

4. Prepare a journal entry on Dec. 31 for the closing of variances to Cost of Goods Sold. Record the transaction as a compound entry.

GENERAL JOURNAL

	DATE	ACCOUNT	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

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

Answer 1

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Materials	Amount $	Remarks
Standard material cost per unit	1.92		A
Units manufactured	27,000.00		B
Standard material cost	51,840.00		C=A*B
Standard cost of Actual Quantity used
Actual Quantity used	71,550.00		D
Standard Rate per unit	0.80		E
Standard cost of Actual Quantity used	57,240.00		F=D*E
Actual cost	45,967.00		G
Usage Variance	5,400.00	Unfavorable	H=F-C
Price Variance	(11,273.00)	Favorable	I=G-F
Total Variance	(5,873.00)	Favorable	J=H+I
Labor
Standard labor cost per unit	5.92		K
Units manufactured	27,000.00		L
Standard labor cost	159,840.00		M=K*L
Standard cost of Actual Quantity used
Actual Quantity used	21,555.00		N
Standard Rate per unit	7.40		O
Standard cost of Actual Quantity used	159,507.00		P=N*O
Actual cost	156,971.00		Q
Efficiency Variance	(333.00)	Favorable	R=P-M
Rate Variance	(2,536.00)	Favorable	S=Q-P
Total Variance	(2,869.00)	Favorable	T=R+S

Deporte Company
Event	Date	Account	Post Ref.	Debit	Credit
1	31-Dec	Materials		45,967.00
		Cash			45,967.00
2	31-Dec	Work in Process		45,967.00
		Materials			45,967.00
3	31-Dec	Work in Process		156,971.00
		Wages Expense			156,971.00
4	31-Dec	Materials Price Variance		11,273.00
		Labor Efficiency Variance		333.00
		Labor Rate Variance		2,536.00
		Materials Usage Variance			5,400.00
		Cost of Goods Sold			8,742.00