Question

Aquafloat Corporation manufactures rafts for use in swimming pools. The standard cost for material and labor is $89.20 per raft. This includes 8 kilograms of direct material at a standard cost of $5.00 per kilogram, and 6 hours of direct labor at $8.20 per hour. The following data pertain to November: Work-in-process inventory on November 1: none. Work-in-process inventory on November 30: 800 units (75 percent complete as to labor; material is issued at the beginning of processing). Units completed: 5,600 units. Purchases of materials: 50,000 kilograms for $249,250. Total actual labor costs: $300,760. Actual hours of labor: 36,500 hours. Direct-material quantity variance: $ 1,500 unfavorable. Required: 1. Compute the following amounts. a. Direct-labor rate variance for November. b. Direct-labor efficiency variance for November. c. Actual kilograms of material used in the production process during November. d. Actual price paid per kilogram of direct material in November. e. Total amounts of direct-material and direct-labor cost transferred to Finished-Goods Inventory during November. f. The total amount of direct-material and direct-labor cost in the ending balance of Work-in-Process Inventory at the end of November. 2. Prepare journal entries to record the following: a. Purchase of raw material and rate variance. b. Adding direct material to Work-in-Process Inventory and efficiency variance. c. Adding direct labor to Work-in-Process Inventory and labor variances.

Answer 1

1. a. Direct labor rate variance = $ 300,760 - 36,500 hours x $ 8.20 = $ 1,460 U

b. Direct labor efficiency variance = ( 36,500 - 37,200 ) x $ 8.20 = $ 5,740 F

Equivalent units produced in November for direct labor = 5,600 + 800 x 0.75 = 6,200 units

Standard labor hours for equivalent units of production = 6,200 units x 6 hours = 37,200 hours

c. Actual kilograms used = 51,500 kilograms

Standard quantity of materials required for production = ( 5,600 + 800 ) x 8 kgs = 51,200 kgs

Actual quantity used = 51,200 + $ 1,500 / 5 = 51,500 kilograms

d. Actual price paid per kilogram = $ 249,250 / 50,000 kilograms = $ 4.985 per kilogram

e. Total amount of direct material costs and direct labor cost transferred to Finished Goods Inventory : $ 499,520

Total amount of direct material cost transferred to Finished Goods Inventory = 5,600 units x $ ( 8 x 5 ) = $ 224,000

Total amount of direct labor cost transferred to Finished Goods Inventory = 5,600 units x $ ( 6 x 8.20 ) = $ 275,520

f. The total amount of direct-material and direct-labor cost in the ending balance of Work-in-Process Inventory at the end of November: $ 61,520

	Materials	Labor	Total
Equivalents units in ending work in process inventory	800	600
Standard cost per equivalent unit	40	49.20
Cost of ending work in process inventory	$ 32,000	$29,520	$61,520

2.

Transaction / Event	Account Titles	Debit	Credit
		$	$
a.	Direct Materials Inventory (50,000 kgs @ $ 5)	250,000
	Direct Materials Rate Variance		750
	Accounts Payable		249,250
	Purchase of raw materials and rate variance
b.	Work in Process Inventory ( 5,600 + 800) units x $ 40	256,000
	Direct Materials Quantity Variance	1,500
	Direct Materials Inventory		257,500
	Adding direct materials to WIP inventory and efficiency variance
c.	Work in Process Inventory	305,040
	Direct Labor Rate Variance	1,460
	Direct Labor Efficiency Variance		5,740
	Factory Wages Payable		300,760
	Adding direct labor cost to work in process inventory and labor variances