Question

Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller.

  

Direct Labor:	Direct Material:
Quantity, 0.25 hour	Quantity, 4 kilograms
Rate, $16 per hour	Price, $0.80 per kilogram

  

Actual material purchases amounted to 240,000 kilograms at $.81 per kilogram. Actual costs incurred in the production of 50,000 units were as follows:

Direct labor:	$211,900 for 13,000 hours
Direct material:	$170,100 for 210,000 kilograms

Exercise 10-31

Required:

Prepare the following journal entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

1) Record the purchase of direct material on account and the direct-material purchase price variance.

2) Record the addition of direct-material cost to work-in-process inventory and the direct-material quantity variance.

3) Record the addition of direct-labor cost to work-in-process inventory and the direct-labor variances.

4) Record the closing of the direct-material and direct-labor variances to cost of goods sold.

Answer 1

Solution:

Journal Entries
S. No.	Particulars	Debit	Credit
1	Raw Material inventory Dr (240000*$0.80)	$192,000.00
	Direct material price variance Dr (240000*$0.01)	$2,400.00
	To Cash (240000*$0.81)		$194,400.00
	(Being raw material purchased)
2	Work in Process Dr (50000*4*$0.80)	$160,000.00
	Direct material quantity variance Dr (10000*$0.80)	$8,000.00
	To Raw Material inventory (210000*$0.80)		$168,000.00
	(To recored consumption of raw material in to production)
3.1	Factory Wages Dr (13000*$16)	$208,000.00
	Direct labor rate variance Dr (13000*$0.30)	$3,900.00
	To Cash (13000*$16.30)		$211,900.00
	(Being labor cost incurred)
3.2	Work in Process Dr (50000*0.25*$16)	$200,000.00
	Direct labor efficiency variance Dr (500*$16)	$8,000.00
	To Factory Wages (13000*$16)		$208,000.00
	(To direct labor used in production)
4	Cost of goods sold Dr	$22,300.00
	To Direct material price variance		$2,400.00
	To Direct material quantity variance		$8,000.00
	To Direct labor rate variance		$3,900.00
	To Direct labor efficiency variance		$8,000.00
	(Being direct material and direct labor variances closed to cost of goods sold)