The Bartlesville plant of Iverson Company produces an industrial chemical. At the beginning of the year, the Bartlesville plant had the following standard cost sheet:

The Bartlesville plant computes its overhead rates using practical volume, which is 72,000 units. The actual results for the year are:

a. Units produced: 70,000

b. Materials purchased: 744,000 pounds at $1.50

c. Materials used: 736,000 pounds

d. Direct labor: 56,000 hours at $17.90

e. Fixed overhead: $214,000

f. Variable overhead: $175,400 Required:
1. Compute price and usage variances for materials.
2. Compute the labor rate and labor efficiency variances.
3. Compute the fixed overhead spending and volume variances. Interpret the volume variance.
4. Compute the variable overhead spending and efficiency variances.
5. Prepare journal entries for the following:

a. The purchase of raw materials

b. The issuance of raw materials to production (Work in Process)

c. The addition of labor to Work in Process

d. The addition of overhead to Work in Process

e. The incurrence of actual overhead costs

f. Closing out of variances to Cost of Goods Sold

Transcribed Image Text:

Direct materials (10 lbs. $1.60) $16.00 Direct labor (0.75 hrs. @ $18.00) Fixed overhead (0.75 hrs. @ $4.00) Variable overhead (0.75 hrs.@ $3.00) Standard cost per unit 13.50 3.00 2.25 $34.75