Trundle Corporation manufactures one product. The company uses a standard cost system in which inventories are recorded at their standard costs. There is no variable manufacturing overhead. The standard cost card for the company's only product is as follows:?InputsStandard Quantity or HoursStandard Price or RateStandard Cost?Direct materials2.6 pounds$8.00 per pound$20.80?Direct labor0.70 hours$21.50 per hour15.05?Fixed manufacturing overhead0.70 hours$14.50 per hour 10.15?Total standard cost per unit???? $46.00During the year, the company completed the following transactions concerning raw materials:a. Purchased 99,100 pounds of raw material at a price of $7.90 per pound.b. Used 89,020 pounds of the raw material to produce 34,200 units of work in
process.Required:Record the above transactions in the worksheet that appears below. Because of the width of the worksheet, it is in two parts. In your text, these two parts would be joined side-by-side to make one very wide worksheet. The beginning balances have been provided for each of the accounts, including the Property, Plant, and Equipment (net) account which is abbreviated as PP&E (net).?CashRaw MaterialsWork in ProcessFinished GoodsPP&E (net)=Materials Price VarianceMaterials Quantity Variance1/1$1,050,000$56,160$0$64,400$472,900=$0$0a.?????=??b.?????=???Labor Rate VarianceLabor Efficiency VarianceFOH Budget VarianceFOH Volume VarianceRetained Earnings1/1$0$0$0$0$1,643,460a.?????b.?????
What will be an ideal response?
Materials price variance = AQ × (AP - SP)
= 99,100 pounds × ($7.90 per pound - $8.00 per pound)
= 99,100 pounds × (-$0.10 per pound)
= $9,910 F
Materials quantity variance:
SQ = Actual output × Standard quantity = 34,200 units × 2.6 pounds per unit = 88,920 pounds
Materials quantity variance = (AQ - SQ) × SP
= (89,020 pounds - 88,920 pounds) × $8.00 per pound
= (100 pounds) × $8.00 per pound
= $800 U
| ? | ? | Cash | Raw Materials | Work in Process | Finished Goods | PP&E (net) | = |
| ? | 1/1 | $1,050,000 | $56,160 | $0 | $64,400 | $472,900 | = |
| ? | a. | (782,890) | 792,800 | ? | ? | ? | = |
| ? | b. | ? | (712,160) | 711,360 | ? | ? | = |
| ? | ? | Materials Price Variance | Materials Quantity Variance | Labor Rate Variance | Labor Efficiency Variance | FOH Budget Variance | FOH Volume Variance | Retained Earnings |
| ? | 1/1 | ? | ? | ? | ? | ? | ? | $1,643,460 |
| ? | a. | 9,910 | ? | ? | ? | ? | ? | ? |
| ? | b. | ? | (800) | ? | ? | ? | ? | ? |
The explanations are as follows:
a. Cash decreases by the actual cost of the raw materials purchased, which is AQ × AP = 99,100 pounds × $7.90 per pound = $782,890. Raw Materials increase by the standard cost of the raw materials purchased, which is AQ × SP = 99,100 pounds × $8.00 per pound = $792,800. The materials price variance is $9,910 F.
b. Raw Materials decrease by the standard cost of the raw materials used in production, which is AQ × SP = 89,020 pounds × $8.00 per pound = $712,160. Work in Process increases by the standard cost of the standard quantity of raw materials allowed for the actual output, which is SQ × SP = (34,200 units × 2.6 pounds per unit) × $8.00 per pound = 88,920 pounds × $8.00 per pound = $711,360. The difference is the Materials Quantity Variance which is $800 U.
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