Question:
(Variance calculation and journal entries) Montreal Toy Co. makes small plastic toys. Standard quantities and standard costs follow for material and labor.
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Standard Quantity
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Standard Cost
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Material
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1/2 pound
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$4 per pound ($2.00 per unit of output)
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Labor
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12 minutes
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$16 per hour ($3.20 per unit of output)
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During October 2001, 50,000 toys were produced. The purchasing agent bought 29,000 pounds of material during the month at $4.13 per pound. October payroll for the factory revealed direct labor cost of $160,680 on 10,300 direct labor hours. During the month, 26,300 pounds of raw material were used in production.
a. Compute material and labor variances, basing the material price variance on the quantity of material purchased.
b. Assuming a perpetual inventory system, prepare general journal entries for the month.