1. HPC, Inc. has developed a standard pricing system for its products. The variable cost standards (based on expected output of 7000 units) are:
3# direct material per unit @ $6 per pound $ 18.00
2 hours direct labor @ $15 per hour 30.00
In January 20XX, the firm actually produced 7200 units and actual manufacturing costs were as follows:
Direct material purchased & used 21,700# for a total price of $129,115
Direct labor paid 14,250 hours @ $15.10 per hour
a. Compute all direct material and direct labor variances (4 variances in total). Be sure to note if a variance is favorable (F) or unfavorable (U). Note that you need to consider the # of units actually produced when computing your efficiency variances. Reviewing the problem in the exam 3 review should be helpful.
b. Assume that all direct material was purchased on account and those purchases are only recorded at the end of the month. Also assume that the firm uses a standard cost accounting system (with variances recorded). Prepare the journal entry for direct materials purchased during the month.
c. Assume that all direct material used is only recorded at the end of the month. Also assume that the firm uses a standard cost accounting system (with variances recorded). Prepare the journal entry for direct materials used during the month.