Missing Information:
The normal capacity of is 40,000 direct labor hours and 20,000 units per month. A finished unit requires 6 lb of materials at an estimated cost of $2 per pound. The estimated cost of labor is $10.00 per hour.
Answer:
Raw materials Inventory 260,000 debit
D:M price variance 2,600 debit
Account Payable 257,400 credit
--to record the purchase ---
WIP-Inventory 248,000 debit
DM quality variance 2,000 debit
Raw materials Inventory 250,000 debit
--to record requisition of materials--
WIP-Inventory 420,000 debit
D:L rate variance 1,640 debit
Wages Payables 411,640 credit
DL efficiency variance 10,000 credit
--to record the charge of labor into WIP--
Explanation:
130,000 pounds x $1.98 (actual) = $257,400
130,000 pounds x $2.00 (standard) = $260,000
variance 2,600 favorable
Quantity Variance:
actual: 125,000 x $2 = 250,000
standard: 21,000 x 6 = 124,000 pounds x $2 = 248,000
variance: 2,000 unfavorable
41,000 hours x $10.04 each = $411,640
41,000 hours x $10.00 each = $410,000
rate variance 1,640 unfavorable
efficiency variance:
21,000 x 2 hours = 42,000 hours x $10 = 420,000
actual 41,000 x $10 = 410,000
favorable 10,000
