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Appendix 11B, Journal Entries to Record Variances

LO6: Fixed overhead variances (App 11A)

LO4: Variable overhead variances

LO7: Journal entries (App 11B)

LO5: Performance measures

Professional Exam Adapted

LO3: Direct labor variances

LO2: Materials variances

LO1: Setting standards

Difficulty

1 2 3 4 5 6 7 8 9 10 11 12

Question Type T/F T/F Conceptual M/C Conceptual M/C Conceptual M/C Conceptual M/C Conceptual M/C Conceptual M/C M/C M/C M/C M/C

ID 3/e: 9-12 6/e: 9-15 EN, 4/19/2003 B1 EN, 4/19/2003 C2 LD9e:CH10Q08 EN, 4/19/2003 F2 EN, 4/19/2003 H1 LD9e:CH10Q09 9/21/2004 Single MC AQ3 9/21/2004 Single MC AR3 9/21/2004 Single MC AS3 9/21/2004 Single MC AT3

M M M M M M M M E E E E x x x x x x x x x x

x x x x x x x x x x x x

Origin Authors Authors E.N. E.N. Larry Deppe E.N. E.N. Larry Deppe E.N. E.N. E.N. E.N.

CMA/CPA origin

11B-1

Appendix 11B, Journal Entries to Record Variances

13 14 15 16 17 18 11B1 11B2 11B3 11B4 11B5 19 2023 2427 2831 3234 3537 38 39 40 41 42 43 44 45 46

M/C M/C M/C M/C M/C M/C M/C Multipart M/C Multipart M/C Multipart M/C Multipart M/C Multipart M/C Problem Problem Problem Problem Problem Problem Problem Problem Problem

M E E E E E E M M M M M H M M E E M M E E x x x x x x x x

x x x x x x x

8/e: ATB10-54 9/21/2004 Single MC AK3 9/21/2004 Single MC AL3 9/21/2004 Single MC AM3 9/21/2004 Single MC AN3 9/21/2004 Single MC AO3 9/21/2004 Single MC AP3 5/e: 9-52 to 56 9/21/2004 Multi MC E3 9/21/2004 Multi MC F3 9/21/2004 Multi MC G3 9/21/2004 Multi MC H3 LD9e:CH10P1 EN 4/20/2003 D3 EN 4/21/2003 E3 9/15/2004 Problem H3 9/15/2004 Problem I3 EN 4/21/2003 H3 EN 4/21/2003 I3 9/21/2004 Problem J3 9/21/2004 Problem K3

David Keyes E.N. E.N. E.N. E.N. E.N. E.N. Authors E.N. E.N. E.N. E.N. Larry Deppe E.N. E.N. E.N. E.N. E.N. E.N. E.N. E.N.

x x x

x x x x

x x x x x x

x x x x

x x x x x

11B-2

Appendix 11B, Journal Entries to Record Variances

True / False Questions 1. A favorable labor efficiency variance would result in a credit balance in the labor efficiency variance account. True False

2. A favorable materials quantity variance would appear as a debit in a journal entry. True False

Multiple Choice Questions 3. When the actual price paid on credit for a raw material is less than its standard price, the journal entry would include: A. Debit to Raw Materials; Credit to Materials Price Variance B. Debit to Accounts Payable; Credit to Materials Price Variance C. Debit to Raw Materials; Debit to Materials Price Variance D. Debit to Accounts Payable; Debit to Materials Price Variance

4. When the actual amount of a raw material used in production is less than the standard amount allowed for the actual output, the journal entry would include: A. Debit to Raw Materials; Credit to Materials Quantity Variance B. Debit to Work-In-Process; Credit to Materials Quantity Variance C. Debit to Raw Materials; Debit to Materials Quantity Variance D. Debit to Work-In-Process; Debit to Materials Quantity Variance

11B-3

Appendix 11B, Journal Entries to Record Variances

5. Drake Company purchased materials on account. The entry to record the purchase of materials having a standard cost of $1.50 per pound from a supplier at $1.60 per pound would include a: A. credit to Raw Materials Inventory. B. debit to Work in Process. C. credit to Materials Price Variance. D. debit to Materials Price Variance.

6. When the actual wage rate paid to direct labor workers is less than the standard wage rate, the journal entry would include: A. Credit to Wages Payable; Credit to Labor Rate Variance B. Credit to Work-In-Process; Credit to Labor Rate Variance C. Credit to Wages Payable; Debit to Labor Rate Variance D. Credit to Work-In-Process; Debit to Labor Rate Variance

7. When the actual direct labor-hours are less than the standard direct labor-hours allowed for the actual output of the period, the journal entry would include: A. Credit to Wages Payable; Credit to Labor Efficiency Variance B. Credit to Work-In-Process; Credit to Labor Efficiency Variance C. Credit to Wages Payable; Debit to Labor Efficiency Variance D. Credit to Work-In-Process; Debit to Labor Efficiency Variance

11B-4

Appendix 11B, Journal Entries to Record Variances

8. Which of the following entries would correctly record the charging of direct labor costs to Work in Process given an unfavorable labor efficiency variance and a favorable labor rate variance?

A. B.

C.

D.

9. Lafaso Corporation has provided the following data concerning its direct labor costs for July:

The Labor Rate Variance for July would be recorded as a: A. credit of $7,014. B. debit of $8,584. C. debit of $7,014. D. credit of $8,584.

11B-5

Appendix 11B, Journal Entries to Record Variances

10. Lemoine Corporation's standard wage rate is $11.50 per direct labor-hour (DLH) and according to the standards, each unit of output requires 5.5 DLHs. In February, 8,900 units were produced, the actual wage rate was $11.60 per DLH, and the actual hours were 51,210 DLHs. The Labor Rate Variance for February would be recorded as a: A. debit of $5,121. B. credit of $4,895. C. credit of $5,121. D. debit of $4,895.

11. Capizzi Corporation has provided the following data concerning its direct labor costs for February:

The Labor Efficiency Variance for February would be recorded as a: A. debit of $45,562. B. credit of $45,562. C. debit of $44,726. D. credit of $44,726.

12. Murdough Corporation's standard wage rate is $10.80 per direct labor-hour (DLH) and according to the standards, each unit of output requires 2.0 DLHs. In February, 1,800 units were produced, the actual wage rate was $9.80 per DLH, and the actual hours were 3,990 DLHs. The Labor Efficiency Variance for February would be recorded as a: A. debit of $4,212. B. credit of $4,212. C. debit of $3,822. D. credit of $3,822.

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Appendix 11B, Journal Entries to Record Variances

13. Kouba Manufacturing Corporation's actual direct labor cost for the month of July was $45,000. Its labor rate variance for July was $1,000 unfavorable. Its labor efficiency variance was $5,000 favorable. What summary journal entry would Kouba make to record this information?

A.

B.

C.

D.

14. Manikas Corporation has provided the following data concerning its most important raw material, compound V82T:

When recording the purchase of materials, Raw Materials would be: A. debited for $148,920. B. credited for $149,650. C. debited for $149,650. D. credited for $148,920.

11B-7

Appendix 11B, Journal Entries to Record Variances

15. Curd Corporation has provided the following data concerning its most important raw material, compound J33X:

When recording the use of materials in production, Raw Materials would be: A. debited for $41,417. B. credited for $41,417. C. debited for $38,922. D. credited for $38,922.

16. Compound G92N is used to make Passero Corporation's major product. The standard cost of G92N is $28.60 per ounce and the standard quantity is 2.9 ounces per unit of output. In the most recent month, 2,000 ounces of the raw material were purchased at a cost of $29.50 per ounce. When recording the purchase of materials, Raw Materials would be: A. credited for $59,000. B. debited for $57,200. C. credited for $57,200. D. debited for $59,000.

17. Compound V61Z is used to make Rigby Corporation's major product. The standard cost of compound V61Z is $33.60 per ounce and the standard quantity is 5.5 ounces per unit of output. In the most recent month, 3,130 ounces of the compound were used to make 700 units of the output. When recording the use of materials in production, Raw Materials would be: A. credited for $129,360. B. credited for $105,168. C. debited for $105,168. D. debited for $129,360.

11B-8

Appendix 11B, Journal Entries to Record Variances

18. Data concerning the direct labor costs for December of Dimpfl Corporation appear below:

The journal entry to record the incurrence of direct labor costs in December would include the following for Work in Process: A. credit of $296,424. B. debit of $296,424. C. credit of $388,962. D. debit of $388,962.

19. Kirsch Corporation's standard wage rate is $13.40 per direct labor-hour (DLH) and according to the standards, each unit of output requires 8.9 DLHs. In May, 5,000 units were produced, the actual wage rate was $12.80 per DLH, and the actual hours were 41,790 DLHs. In the journal entry to record the incurrence of direct labor costs in May, the Work in Process entry would consist of a: A. debit of $596,300. B. debit of $534,912. C. credit of $534,912. D. credit of $596,300.

11B-9

Appendix 11B, Journal Entries to Record Variances

The Dexon Company makes and sells a single product called a Mip and uses a standard costing system. The following standards have been established for one unit of Mip:

There were no inventories of any kind on August 1. During August, the following events occurred: Purchased 15,000 board feet at the total cost of $24,000. Used 12,000 board feet to produce 2,100 Mips. Used 1,700 hours of direct labor time at a total cost of $20,060.

20. To record the purchase of direct materials, the general ledger would include what entry to the Materials Price Variance Account? A. $1,500 credit B. $1,500 debit C. $6,000 credit D. $6,000 debit

21. To record the use of direct materials in production, the general ledger would include what entry to the Materials Quantity Variance account? A. $3,600 debit B. $3,600 credit C. $900 debit D. $900 credit

22. To record the incurrence of direct labor cost and its use in production, the general ledger would include what entry to the Labor Rate Variance account? A. $240 credit B. $240 debit C. $340 debit D. $340 credit

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Appendix 11B, Journal Entries to Record Variances

23. To record the incurrence of direct labor costs and its use in production, the general ledger would include what entry to the Labor Efficiency Variance account? A. $480 credit B. $240 debit C. $1,200 debit D. $1,200 credit

Henifin Corporation has provided the following data concerning its most important raw material, compound K91J:

The raw material was purchased on account.

24. The debits to the Raw Materials account for January would total: A. $39,330 B. $21,981 C. $19,395 D. $38,790

25. The credits to the Raw Materials account for January would total: A. $21,981 B. $19,395 C. $38,790 D. $39,330

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Appendix 11B, Journal Entries to Record Variances

26. The Materials Price Variance for January would be recorded as a: A. Credit of $540 B. Debit of $306 C. Credit of $306 D. Debit of $540

27. The Materials Quantity Variance for January would be recorded as a: A. Credit of $2,586 B. Credit of $16,809 C. Debit of $16,809 D. Debit of $2,586

Compound C90N is a raw material used to make Mosbarger Corporation's major product. The standard cost of compound C90N is $38.20 per ounce and the standard quantity is 8.0 ounces per unit of output. Data concerning the compound for September appear below:

The raw material was purchased on account.

28. The debits to the Raw Materials account for September would total: A. $41,250 B. $30,942 C. $30,560 D. $42,020

29. The credits to the Raw Materials account for September would total: A. $30,560 B. $41,250 C. $30,942 D. $42,020

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Appendix 11B, Journal Entries to Record Variances

30. The Materials Price Variance for September would be recorded as a: A. Credit of $567 B. Credit of $770 C. Debit of $567 D. Debit of $770

31. The Materials Quantity Variance for September would be recorded as a: A. Debit of $382 B. Credit of $11,078 C. Credit of $382 D. Debit of $11,078

Castanada Corporation has provided the following data concerning its direct labor costs for August:

32. The journal entry to record the incurrence of direct labor costs in August would include the following for Work in Process: A. Debit of $222,768 B. Credit of $264,768 C. Credit of $222,768 D. Debit of $264,768

33. The Labor Rate Variance for August would be recorded as a: A. Debit of $18,912 B. Credit of $18,912 C. Credit of $17,136 D. Debit of $17,136

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Appendix 11B, Journal Entries to Record Variances

34. The Labor Efficiency Variance for August would be recorded as a: A. Credit of $24,864 B. Debit of $24,864 C. Debit of $23,088 D. Credit of $23,088

Lian Corporation's standard wage rate is $12.10 per direct labor-hour (DLH) and according to the standards, each unit of output requires 7.1 DLHs. In June, 4,500 units were produced, the actual wage rate was $11.90 per DLH, and the actual hours were 35,930 DLHs.

35. In the journal entry to record the incurrence of direct labor costs in June, the Work in Process entry would consist of a: A. debit of $427,567. B. credit of $427,567. C. debit of $386,595. D. credit of $386,595.

36. The Labor Rate Variance for June would be recorded as a: A. credit of $6,390. B. credit of $7,186. C. debit of $7,186. D. debit of $6,390.

37. The Labor Efficiency Variance for June would be recorded as a: A. debit of $47,362. B. debit of $48,158. C. credit of $48,158. D. credit of $47,362.

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Appendix 11B, Journal Entries to Record Variances

Essay Questions 38. Vernon Mills, Inc. is a large producer of men's and women's clothing. The company uses standard costs for all of its products. The standard costs and actual costs per unit of product for a recent period are given below for one of the company's product lines:

During this period, the company produced 4,800 units of this product. A comparison of standard and actual costs for the period on a total cost basis is given below:

There was no inventory of materials on hand at the beginning of the period. During the period, 21,120 yards of materials were purchased, all of which were used in production. Required: a. For direct materials, compute the price and quantity variances for the period and prepare journal entries to record all activity relating to direct materials for the period. b. For direct labor, compute the rate and efficiency variances and prepare a journal entry to record the incurrence of direct labor cost for the period. c. For variable overhead, compute the rate and efficiency variances.

11B-15

Appendix 11B, Journal Entries to Record Variances

39. The following standards have been established for a raw material used in the production of product N70:

The following data pertain to a recent month's operations:

Required: a. What is the materials price variance for the month? b. What is the materials quantity variance for the month? c. Prepare journal entries to record the purchase and use of the raw material during the month. (All raw materials are purchased on account.)

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Appendix 11B, Journal Entries to Record Variances

40. The standards for product C78 call for 2.0 pounds of a raw material that costs $13.30 per pound. Last month, 5,900 pounds of the raw material were purchased for $74,045. The actual output of the month was 2,640 units of product C78. A total of 5,300 pounds of the raw material were used to produce this output. Required: a. What is the materials price variance for the month? b. What is the materials quantity variance for the month? c. Prepare journal entries to record the purchase and use of the raw material during the month. (All raw materials are purchased on account.)

41. Schinkel Corporation has provided the following data concerning its most important raw material, compound X87C:

The raw material was purchased on account. Required: a. Record the purchase of the raw material in a journal entry. b. Record the use of the raw material in production in a journal entry.

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Appendix 11B, Journal Entries to Record Variances

42. Compound A39A is used by Ashline Corporation to make one of its products. The standard cost of compound A39A is $32.00 per ounce and the standard quantity is 8.5 per unit of output. Data concerning the compound in the most recent month appear below:

The raw material was purchased on account. Required: a. Record the purchase of the raw material in a journal entry. b. Record the use of the raw material in production in a journal entry.

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Appendix 11B, Journal Entries to Record Variances

43. The following direct labor standards have been established for product K62G:

The following data pertain to the most recent month's operations during which 3,040 units of product K62G were made:

Required: a. What was the labor rate variance for the month? b. What was the labor efficiency variance for the month? c. Prepare a journal entry to record direct labor costs during the month, including the direct labor variances.

44. The standards for product V33I specify 8.0 direct labor-hours per unit at $11.20 per direct labor-hour. Last month 760 units of product V33I were produced using 6,500 direct laborhours at a total direct labor wage cost of $75,075. Required: a. What was the labor rate variance for the month? b. What was the labor efficiency variance for the month? c. Prepare a journal entry to record direct labor costs during the month, including the direct labor variances.

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Appendix 11B, Journal Entries to Record Variances

45. Martorella Corporation has provided the following data concerning its direct labor costs for October:

Required: Prepare the journal entry to record the incurrence of direct labor costs.

46. The direct labor standards at Lounsbury Corporation are $12.50 per direct labor-hour (DLH) and 6.1 DLHs per unit of output. In November, 4,700 units were produced, the actual wage rate was $12.50 per DLH, and the actual hours were 29,570 DLHs. Required: Prepare the journal entry to record the incurrence of direct labor costs.

11B-20

Appendix 11B, Journal Entries to Record Variances Key

True / False Questions 1. A favorable labor efficiency variance would result in a credit balance in the labor efficiency variance account. TRUE

AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 7 Level: Medium

2. A favorable materials quantity variance would appear as a debit in a journal entry. FALSE

AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 7 Level: Medium

Multiple Choice Questions 3. When the actual price paid on credit for a raw material is less than its standard price, the journal entry would include: A. Debit to Raw Materials; Credit to Materials Price Variance B. Debit to Accounts Payable; Credit to Materials Price Variance C. Debit to Raw Materials; Debit to Materials Price Variance D. Debit to Accounts Payable; Debit to Materials Price Variance

AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Medium

11B-21

Appendix 11B, Journal Entries to Record Variances Key

4. When the actual amount of a raw material used in production is less than the standard amount allowed for the actual output, the journal entry would include: A. Debit to Raw Materials; Credit to Materials Quantity Variance B. Debit to Work-In-Process; Credit to Materials Quantity Variance C. Debit to Raw Materials; Debit to Materials Quantity Variance D. Debit to Work-In-Process; Debit to Materials Quantity Variance

AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Medium

5. Drake Company purchased materials on account. The entry to record the purchase of materials having a standard cost of $1.50 per pound from a supplier at $1.60 per pound would include a: A. credit to Raw Materials Inventory. B. debit to Work in Process. C. credit to Materials Price Variance. D. debit to Materials Price Variance.

AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Medium

6. When the actual wage rate paid to direct labor workers is less than the standard wage rate, the journal entry would include: A. Credit to Wages Payable; Credit to Labor Rate Variance B. Credit to Work-In-Process; Credit to Labor Rate Variance C. Credit to Wages Payable; Debit to Labor Rate Variance D. Credit to Work-In-Process; Debit to Labor Rate Variance

AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Medium

11B-22

Appendix 11B, Journal Entries to Record Variances Key

7. When the actual direct labor-hours are less than the standard direct labor-hours allowed for the actual output of the period, the journal entry would include: A. Credit to Wages Payable; Credit to Labor Efficiency Variance B. Credit to Work-In-Process; Credit to Labor Efficiency Variance C. Credit to Wages Payable; Debit to Labor Efficiency Variance D. Credit to Work-In-Process; Debit to Labor Efficiency Variance

AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Medium

8. Which of the following entries would correctly record the charging of direct labor costs to Work in Process given an unfavorable labor efficiency variance and a favorable labor rate variance?

A. B.

C.

D.

AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Medium

11B-23

Appendix 11B, Journal Entries to Record Variances Key

9. Lafaso Corporation has provided the following data concerning its direct labor costs for July:

The Labor Rate Variance for July would be recorded as a: A. credit of $7,014. B. debit of $8,584. C. debit of $7,014. D. credit of $8,584. Labor Rate Variance:

A favorable labor rate variance would be credited.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Easy

11B-24

Appendix 11B, Journal Entries to Record Variances Key

10. Lemoine Corporation's standard wage rate is $11.50 per direct labor-hour (DLH) and according to the standards, each unit of output requires 5.5 DLHs. In February, 8,900 units were produced, the actual wage rate was $11.60 per DLH, and the actual hours were 51,210 DLHs. The Labor Rate Variance for February would be recorded as a: A. debit of $5,121. B. credit of $4,895. C. credit of $5,121. D. debit of $4,895. Labor Rate Variance:

An unfavorable labor rate variance would be debited.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Easy

11B-25

Appendix 11B, Journal Entries to Record Variances Key

11. Capizzi Corporation has provided the following data concerning its direct labor costs for February:

The Labor Efficiency Variance for February would be recorded as a: A. debit of $45,562. B. credit of $45,562. C. debit of $44,726. D. credit of $44,726. Labor Efficiency Variance:

An unfavorable labor efficiency variance would be debited.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Easy

11B-26

Appendix 11B, Journal Entries to Record Variances Key

12. Murdough Corporation's standard wage rate is $10.80 per direct labor-hour (DLH) and according to the standards, each unit of output requires 2.0 DLHs. In February, 1,800 units were produced, the actual wage rate was $9.80 per DLH, and the actual hours were 3,990 DLHs. The Labor Efficiency Variance for February would be recorded as a: A. debit of $4,212. B. credit of $4,212. C. debit of $3,822. D. credit of $3,822. Labor Efficiency Variance:

An unfavorable labor efficiency variance would be debited.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Easy

11B-27

Appendix 11B, Journal Entries to Record Variances Key

13. Kouba Manufacturing Corporation's actual direct labor cost for the month of July was $45,000. Its labor rate variance for July was $1,000 unfavorable. Its labor efficiency variance was $5,000 favorable. What summary journal entry would Kouba make to record this information?

A.

B.

C.

D.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Medium

11B-28

Appendix 11B, Journal Entries to Record Variances Key

14. Manikas Corporation has provided the following data concerning its most important raw material, compound V82T:

When recording the purchase of materials, Raw Materials would be: A. debited for $148,920. B. credited for $149,650. C. debited for $149,650. D. credited for $148,920.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 7 Level: Easy

11B-29

Appendix 11B, Journal Entries to Record Variances Key

15. Curd Corporation has provided the following data concerning its most important raw material, compound J33X:

When recording the use of materials in production, Raw Materials would be: A. debited for $41,417. B. credited for $41,417. C. debited for $38,922. D. credited for $38,922.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 7 Level: Easy

16. Compound G92N is used to make Passero Corporation's major product. The standard cost of G92N is $28.60 per ounce and the standard quantity is 2.9 ounces per unit of output. In the most recent month, 2,000 ounces of the raw material were purchased at a cost of $29.50 per ounce. When recording the purchase of materials, Raw Materials would be: A. credited for $59,000. B. debited for $57,200. C. credited for $57,200. D. debited for $59,000.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 7 Level: Easy

11B-30

Appendix 11B, Journal Entries to Record Variances Key

17. Compound V61Z is used to make Rigby Corporation's major product. The standard cost of compound V61Z is $33.60 per ounce and the standard quantity is 5.5 ounces per unit of output. In the most recent month, 3,130 ounces of the compound were used to make 700 units of the output. When recording the use of materials in production, Raw Materials would be: A. credited for $129,360. B. credited for $105,168. C. debited for $105,168. D. debited for $129,360. Raw Materials should be credited for $105,168, which is the actual quantity used times the standard cost, or 3,130 ounces x $33.60.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 7 Level: Easy

18. Data concerning the direct labor costs for December of Dimpfl Corporation appear below:

The journal entry to record the incurrence of direct labor costs in December would include the following for Work in Process: A. credit of $296,424. B. debit of $296,424. C. credit of $388,962. D. debit of $388,962.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 7 Level: Easy

11B-31

Appendix 11B, Journal Entries to Record Variances Key

19. Kirsch Corporation's standard wage rate is $13.40 per direct labor-hour (DLH) and according to the standards, each unit of output requires 8.9 DLHs. In May, 5,000 units were produced, the actual wage rate was $12.80 per DLH, and the actual hours were 41,790 DLHs. In the journal entry to record the incurrence of direct labor costs in May, the Work in Process entry would consist of a: A. debit of $596,300. B. debit of $534,912. C. credit of $534,912. D. credit of $596,300.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 7 Level: Easy

The Dexon Company makes and sells a single product called a Mip and uses a standard costing system. The following standards have been established for one unit of Mip:

There were no inventories of any kind on August 1. During August, the following events occurred: Purchased 15,000 board feet at the total cost of $24,000. Used 12,000 board feet to produce 2,100 Mips. Used 1,700 hours of direct labor time at a total cost of $20,060.

11B-32

Appendix 11B, Journal Entries to Record Variances Key


20. To record the purchase of direct materials, the general ledger would include what entry to the Materials Price Variance Account? A. $1,500 credit B. $1,500 debit C. $6,000 credit D. $6,000 debit

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Medium

21. To record the use of direct materials in production, the general ledger would include what entry to the Materials Quantity Variance account? A. $3,600 debit B. $3,600 credit C. $900 debit D. $900 credit Materials quantity variance = SP** (AQ - SQ*) = $1.50(12,000 - 12,600) = $900 F *SQ = Standard quantity per unit x Actual output = 6 x 2,100 = 12,600 **SP = Total standard cost Number of standard feet = $9.00 6 = $1.50 Since the variance is favorable, it would be credited.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Medium

11B-33

Appendix 11B, Journal Entries to Record Variances Key

22. To record the incurrence of direct labor cost and its use in production, the general ledger would include what entry to the Labor Rate Variance account? A. $240 credit B. $240 debit C. $340 debit D. $340 credit

* Standard Rate = Total standard cost Standard hours per unit = $9.60 Since the variance is favorable, it would be credited.

0.8 = $12

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Medium

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Appendix 11B, Journal Entries to Record Variances Key

23. To record the incurrence of direct labor costs and its use in production, the general ledger would include what entry to the Labor Efficiency Variance account? A. $480 credit B. $240 debit C. $1,200 debit D. $1,200 credit Labor Efficiency Variance:

* Standard Rate = Total standard cost Standard hours per unit = $9.60 Since the variance is unfavorable, it would be debited.

0.8 = $12

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Medium

Henifin Corporation has provided the following data concerning its most important raw material, compound K91J:

The raw material was purchased on account.

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Appendix 11B, Journal Entries to Record Variances Key


24. The debits to the Raw Materials account for January would total: A. $39,330 B. $21,981 C. $19,395 D. $38,790

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Medium

25. The credits to the Raw Materials account for January would total: A. $21,981 B. $19,395 C. $38,790 D. $39,330

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Medium

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Appendix 11B, Journal Entries to Record Variances Key

26. The Materials Price Variance for January would be recorded as a: A. Credit of $540 B. Debit of $306 C. Credit of $306 D. Debit of $540 Debit Materials Price Variance for $540, or 900 liters x (AP - SP) = 900 liters x ($43.70 $43.10) = $540

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Medium

27. The Materials Quantity Variance for January would be recorded as a: A. Credit of $2,586 B. Credit of $16,809 C. Debit of $16,809 D. Debit of $2,586 Standard quantity allowed for the actual output (100 units at 4.5 liters per unit) = 450 liters Debit Materials Quantity Variance for SP (AQ - SQ) = $43.10 (510 - 450) = $2,586

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Medium

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Appendix 11B, Journal Entries to Record Variances Key

Compound C90N is a raw material used to make Mosbarger Corporation's major product. The standard cost of compound C90N is $38.20 per ounce and the standard quantity is 8.0 ounces per unit of output. Data concerning the compound for September appear below:

The raw material was purchased on account.

28. The debits to the Raw Materials account for September would total: A. $41,250 B. $30,942 C. $30,560 D. $42,020

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Medium

29. The credits to the Raw Materials account for September would total: A. $30,560 B. $41,250 C. $30,942 D. $42,020

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Medium

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Appendix 11B, Journal Entries to Record Variances Key

30. The Materials Price Variance for September would be recorded as a: A. Credit of $567 B. Credit of $770 C. Debit of $567 D. Debit of $770 Materials Price Variance = AQ (AP - SP) = 1,100 ($37.50 - $38.20) = $770 F Since the variance is favorable, it would be credited.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Medium

31. The Materials Quantity Variance for September would be recorded as a: A. Debit of $382 B. Credit of $11,078 C. Credit of $382 D. Debit of $11,078 Standard quantity allowed for the actual output (100 units at 8.0 liters per unit) = 800 liters Materials Quantity Variance = SP (AQ - SQ) = $38.20 (810 - 800) = $382 U Since the variance is unfavorable, it would be debited.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Medium

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Appendix 11B, Journal Entries to Record Variances Key

Castanada Corporation has provided the following data concerning its direct labor costs for August:

32. The journal entry to record the incurrence of direct labor costs in August would include the following for Work in Process: A. Debit of $222,768 B. Credit of $264,768 C. Credit of $222,768 D. Debit of $264,768

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Medium

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Appendix 11B, Journal Entries to Record Variances Key

33. The Labor Rate Variance for August would be recorded as a: A. Debit of $18,912 B. Credit of $18,912 C. Credit of $17,136 D. Debit of $17,136 Labor Rate Variance:

Since the variance is unfavorable, it would be debited.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Medium

34. The Labor Efficiency Variance for August would be recorded as a: A. Credit of $24,864 B. Debit of $24,864 C. Debit of $23,088 D. Credit of $23,088 Labor Efficiency Variance:

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Medium

11B-41

Appendix 11B, Journal Entries to Record Variances Key

Lian Corporation's standard wage rate is $12.10 per direct labor-hour (DLH) and according to the standards, each unit of output requires 7.1 DLHs. In June, 4,500 units were produced, the actual wage rate was $11.90 per DLH, and the actual hours were 35,930 DLHs.

35. In the journal entry to record the incurrence of direct labor costs in June, the Work in Process entry would consist of a: A. debit of $427,567. B. credit of $427,567. C. debit of $386,595. D. credit of $386,595.

* Standard hours allowed = Actual output in units x Standard input per unit = 4,500 x 7.10 = 31,950 hours

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Medium

11B-42

Appendix 11B, Journal Entries to Record Variances Key

36. The Labor Rate Variance for June would be recorded as a: A. credit of $6,390. B. credit of $7,186. C. debit of $7,186. D. debit of $6,390. Labor Rate Variance:

Since the variance is favorable, it would be credited.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Medium

37. The Labor Efficiency Variance for June would be recorded as a: A. debit of $47,362. B. debit of $48,158. C. credit of $48,158. D. credit of $47,362. Labor Efficiency Variance:

Since the variance is unfavorable, it would be debited.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Medium

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Appendix 11B, Journal Entries to Record Variances Key

Essay Questions 38. Vernon Mills, Inc. is a large producer of men's and women's clothing. The company uses standard costs for all of its products. The standard costs and actual costs per unit of product for a recent period are given below for one of the company's product lines:

During this period, the company produced 4,800 units of this product. A comparison of standard and actual costs for the period on a total cost basis is given below:

There was no inventory of materials on hand at the beginning of the period. During the period, 21,120 yards of materials were purchased, all of which were used in production. Required: a. For direct materials, compute the price and quantity variances for the period and prepare journal entries to record all activity relating to direct materials for the period. b. For direct labor, compute the rate and efficiency variances and prepare a journal entry to record the incurrence of direct labor cost for the period. c. For variable overhead, compute the rate and efficiency variances.

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Appendix 11B, Journal Entries to Record Variances Key

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Appendix 11B, Journal Entries to Record Variances Key

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 3 Learning Objective: 4 Learning Objective: 7 Level: Hard

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Appendix 11B, Journal Entries to Record Variances Key


39. The following standards have been established for a raw material used in the production of product N70:

The following data pertain to a recent month's operations:

Required: a. What is the materials price variance for the month? b. What is the materials quantity variance for the month? c. Prepare journal entries to record the purchase and use of the raw material during the month. (All raw materials are purchased on account.)

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Appendix 11B, Journal Entries to Record Variances Key


a. Materials price variance = (AQ x AP) - (AQ x SP) = $119,460 - (6,600 x $18.30) = $1,320 F b. Materials quantity variance = SP(AQ - SQ*) = $18.30(6,000 - 5,760) = $4,392 U *SQ = Standard quantity per unit x Actual output = 8.0 x 720 = 5,760

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Medium

11B-48

Appendix 11B, Journal Entries to Record Variances Key

40. The standards for product C78 call for 2.0 pounds of a raw material that costs $13.30 per pound. Last month, 5,900 pounds of the raw material were purchased for $74,045. The actual output of the month was 2,640 units of product C78. A total of 5,300 pounds of the raw material were used to produce this output. Required: a. What is the materials price variance for the month? b. What is the materials quantity variance for the month? c. Prepare journal entries to record the purchase and use of the raw material during the month. (All raw materials are purchased on account.) a. Materials price variance = (AQ x AP) - (AQ x SP) = $74,045 - (5,900 x $13.30) = $4,425 F b. Materials quantity variance = SP(AQ - SQ*) = $13.30(5,300 - 5,280) = $266 U *SQ = Standard quantity per unit x Actual output = 2.0 x 2,640 = 5,280 c. Journal entries to record the purchase and use of the raw material:

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Medium

11B-49

Appendix 11B, Journal Entries to Record Variances Key

41. Schinkel Corporation has provided the following data concerning its most important raw material, compound X87C:

The raw material was purchased on account. Required: a. Record the purchase of the raw material in a journal entry. b. Record the use of the raw material in production in a journal entry.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Easy

11B-50

Appendix 11B, Journal Entries to Record Variances Key

42. Compound A39A is used by Ashline Corporation to make one of its products. The standard cost of compound A39A is $32.00 per ounce and the standard quantity is 8.5 per unit of output. Data concerning the compound in the most recent month appear below:

The raw material was purchased on account. Required: a. Record the purchase of the raw material in a journal entry. b. Record the use of the raw material in production in a journal entry.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 7 Level: Easy

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Appendix 11B, Journal Entries to Record Variances Key

43. The following direct labor standards have been established for product K62G:

The following data pertain to the most recent month's operations during which 3,040 units of product K62G were made:

Required: a. What was the labor rate variance for the month? b. What was the labor efficiency variance for the month? c. Prepare a journal entry to record direct labor costs during the month, including the direct labor variances. a. Labor rate variance = (AH x AR) - (AH x SR) = $81,130 - (6,100 x $13.60) = $1,830 F b. Labor efficiency variance = SR(AH - SH*) = $13.60 (6,100 - 6,080) = $272 U *SH = Standard hours per unit x Actual output = 2.0 x 3,040 = 6,080 c. Journal entries to record the direct labor costs:

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Medium

11B-52

Appendix 11B, Journal Entries to Record Variances Key

44. The standards for product V33I specify 8.0 direct labor-hours per unit at $11.20 per direct labor-hour. Last month 760 units of product V33I were produced using 6,500 direct laborhours at a total direct labor wage cost of $75,075. Required: a. What was the labor rate variance for the month? b. What was the labor efficiency variance for the month? c. Prepare a journal entry to record direct labor costs during the month, including the direct labor variances. a. Labor rate variance = (AH x AR) - (AH x SR) = $75,075 - (6,500 x $11.20) = $2,275 U b. Labor efficiency variance = SR(AH - SH*) = $11.20 (6,500 - 6,080) = $4,704 U *SH = Standard hours per unit x Actual output = 8.0 x 760 = 6,080 c. Journal entries to record the direct labor costs:

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Medium

11B-53

Appendix 11B, Journal Entries to Record Variances Key

45. Martorella Corporation has provided the following data concerning its direct labor costs for October:

Required: Prepare the journal entry to record the incurrence of direct labor costs. Standard quantity allowed for the actual output (6,000 units at 3.6 DLHs per unit) = 21,600 DLHs

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Easy

11B-54

Appendix 11B, Journal Entries to Record Variances Key

46. The direct labor standards at Lounsbury Corporation are $12.50 per direct labor-hour (DLH) and 6.1 DLHs per unit of output. In November, 4,700 units were produced, the actual wage rate was $12.50 per DLH, and the actual hours were 29,570 DLHs. Required: Prepare the journal entry to record the incurrence of direct labor costs. Standard quantity allowed for the actual output (4,700 units at 6.1 DLHs per unit) = 28,670 DLHs

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 7 Level: Easy

11B-55