In: Accounting
The revenue and cost information for Odessa Outfitters inc. for 2015 follows:
Sales Revenue 560,000
COGS (at standart) 342,000
DM price variance 1,000 F
DM quantity variance 6,000 F
DL rate varinace 4,000U
DL efficiency variance 2,000 F
Overhead controllable variance 3,500U
Overhead volüme variance 8,000f
a)What is gross profit at standard?
b)What is gross profit actual?
c)Write journal entries for all variance accounts assuming all units are produced and sold in the same period.
Solution a:
Gross profit at standard = Revenue - COGS (at standard) = $560,000 - $342,000 = $218,000
Solution b:
Gross Profit Actual = Gross Profit at Standard + Favorable variance - Unfavorable variances
= $218,000 + $1,000 + $6,000 - $4,000 +$2,000 - $3,500 + $8,000 = $227,500
Solution c:
Journal Entries - Odessa Outfitters inc. | |||
Event | Particulars | Debit | Credit |
1 | DM price variance Dr | $1,000.00 | |
DM quantity variance Dr | $6,000.00 | ||
DL efficiency variance Dr | $2,000.00 | ||
Overhead volume variance Dr | $8,000.00 | ||
To Cost of goods sold | $17,000.00 | ||
(To close Favorable variances to COGS) | |||
2 | Cost of goods sold Dr | $7,500.00 | |
To DL Rate variance | $4,000.00 | ||
To Overhead controllable variance | $3,500.00 | ||
(To close Unfavorable variances to COGS) |