Problem: Computing and journalizing standard cost variances
Java manufactures coffee mugs which it sells to other organizations for personalizing with their own trademarks. Java prepares flexible budgets and utilizes a standard cost system to manage production expenses. The standard unit price of a coffee mug is dependent on fixed budget quantity of 60,200 coffee mugs every month:
Actual cost and production information for July 2012 follow:
• Actual output and sales were 62,900 coffee mugs.
• Actual direct materials use was 10,000 lbs., at an actual cost of $0.17 per lb.
• Actual direct labor use was 202,000 minutes at a total price of $30,300.
• Actual overhead cost was $10,000 variable and $30,500 fixed.
• Marketing as well as admin expenses were $115,000.
Requirements
• Calculate the price and efficiency variances for direct materials and direct labor.
• Journalize the use of direct materials and the assignment of direct labor, including the related variances.
• For production overhead, calculate the variable overhead spending and efficiency variances and the fixed overhead spending and volume variances.
• Journalize the actual production overhead and the applied production overhead. Journalize the movement of all production from WIP. Journalize the closing of the production overhead account.
• Java intentionally employed more-skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise?
The response must include a reference list. Using one-inch margins, double-space, Times New Roman 12 pnt font and APA style of writing and citations.