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Chapter 23: 12SE (page 1308)

Journalizing materials entries

The following direct materials variance analysis was performed for Moore.

Requirements

1. Record Moore鈥檚 direct materials journal entries. Assume purchases were made on the account.

2. Explain what management will do with this variance information

Short Answer

Expert verified
  1. Both the variances are unfavorable; therefore, they are debited in the journal entries.
  2. Variance information help in the controlling of the business entity.

Step by step solution

01

Definition of Variance Analysis

The analysis used to determine the difference between the actual activity level and the standard level of activity is known as variance analysis.

02

Direct material journal entries

Date

Accounts and Explanation

Debit $

Credit $

1

Raw material inventory

$3,160

Direct material cost variance

$2,370

Account payable

$5,530

(To record the purchase of direct material)

2

Work-in-process inventory

$2,880

Direct material efficiency variance

$280

Raw material inventory

$3,160

(To record the used direct material)

$8,690

$8,690

03

Use of variance information

With the variance information, the management will determine whether they acquire the same material at lower rates equal to standard cost or lower than the standard cost.

The business entity will also try to identify the factor in which higher material units are used than established standards.

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Most popular questions from this chapter

Kellogg Company manufacturers and markets ready-to-eat cereal and convenience foods including Raisin Bran, Pop Tarts, Rice Krispies Treats, and Pringles. In addition to the raw materials used when producing its products, Kellogg Company also has significant labor costs associated with the products. As of January 2, 2016, Kellogg Company had approximately 33,577 employees. A shortage in the labor pool, regulatory measures, and other pressures could increase the company鈥檚 labor cost, having a negative impact on the company鈥檚 operating income.

Requirements

1. Suppose Kellogg Company noticed an increase in its actual direct labor costs compared to the budgeted amount. How could Kellogg Company investigate this?

2. What is the direct labor cost variance and how would a company calculate this variance?

3. What is the direct labor efficiency variance and how would a company calculate this variance?

4. Suppose that Kellogg Company found an unfavorable total direct labor variance that was due completely to the direct labor cost variance. What measures could Kellogg Company take to control this variance?

5. Suppose that Kellogg Company found an unfavorable total direct labor variance that was due completely to the direct labor efficiency variance. What measures could Kellogg Company take to control this variance?

Murphy Company managers received the following incomplete performance report:

Units Actual Results Flexible Budget Variance Static Budget Flexible Budget Sales Volume Variance Sales Revenue Contribution Margin Fixed Expenses Operating Income 35,000 (a) (b) 5,000 F \( 29,000 \) 14,000 105,000 0 \( 219,000 \) 27,000 F 85,000 13,000 MURPHY COMPANY Flexible Budget Performance Report For the Year Ended July 31, 2018 134,000 14,000 35,000 \( 35,000 100,000 \) 219,000 84,000 135,000 (c) (d) (e) (f) (h) (g) (i) (j) (k) (l)

Complete the performance report. Identify the employee group that may deserve praise and the group that may be subject to criticism. Give your reasoning.

Question:List the fixed overhead variances, and briefly describe each.

Understanding variance relationships

Complete the table below for the missing variances.

Total Flexible Budget Product Cost Variance

(a)

Total direct material variance

(b)

Total direct labor variance

(c)

Total Manufacturing Overhead Variance

(d)

Direct material cost variance

Direct material efficiency variance

Direct Labor Cost Variance

Direct Labor Efficiency Variance

Total Variable Overhead Variance

Total fixed overhead variance

\(310F

\)165U

\(160U

\)415F

(e)

(f)

Variable Overhead Cost Variance

Variable Overhead Efficiency Variance

Fixed Overhead Cost Variance

\(525U

\)575F

$50F

Question:Match the product cost variance with the manager most probably responsible. Some answers may be used more than once. Some answers may not be used.

Variance Manager

19. Variable overhead cost variance

20. Direct materials efficiency variance

21. Direct labor cost variance

22. Fixed overhead cost variance

23. Direct materials cost variance

a. Human resources

b. Purchasing

c. Production
See all solutions

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