Patrick Co. produces computer desks and uses a standard cost system. Materials standards are 6.75 pounds of material at $10.40 per pound and 5.2 hours of labor at a standard wage rate of $10.50. During December, Patrick Co. produced and sold 3,100 desks. Materials purchases totaled 20,800 pounds at a total cost of $224,780. Materials usage totaled 20,970 pounds. Payroll totaled $183,660 for 17,140 hours worked. Patrick Co. does not maintain inventories other than direct materials. Prepare journal entries to record the following transactions.a. Direct materials purchaseb. Direct materials usagec. Direct labor incurred
What will be an ideal response?
| a. | Direct Materials Inventory | $216,320 | ? |
| ? | Direct Materials Price Variance | 8,460 | ? |
| ? | Accounts Payable | ? | $224,780 |
| b. | Cost of Goods Sold | 217,620 | ? |
| ? | Direct Materials Quantity Variance | 468 | ? |
| ? | Direct Materials Inventory | ? | 218,088 |
| c. | Cost of Goods Sold | 169,260 | ? |
| ? | Direct Labor Rate Variance | 3,690 | ? |
| ? | Direct Labor Efficiency Variance | 10,710 | ? |
| ? | Wages Payable or Cash | ? | 183,660 |
Direct labor rate variance: $183,660 - (17,140 × $10.50) = $3,690 unfavorable
Direct labor efficiency variance: (17,140 × $10.50) - (3,100 × 5.2 × $10.50) = $10,710 unfavorable
Debits to Materials Inventory and Cost of Goods Sold should be based on the standard, not actual cost. Cash, payables, etc., should be credited for the actual cost incurred. Unfavorable variances should appear as debit entries; favorable variances should appear as credit entries.
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