2. ABC Company produces engine parts for large motors. The firm uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products (a valve) is as follows: Direct materials (6 lbs. @$5.4) $32.4 Direct labor (1.5 hrs. @$18) $27 Variable overhead (1.5 hrs. @$4) $6 Fixed overhead (1.5 hrs. @$3) $4.5 Standard unit cost $69.9 The accountant computes its overhead rates using normal activity which is 20,000 units per year. The actual operating data for the year are as follows: a. Production of valves totaled 20,600 units. b. A total of 135,400 pounds of direct materials was purchased at $725,744. c. Direct materials used: 130,000 pounds. d. The company used 30,500 direct labor hours at a total cost of $579,500. e. Actual fixed overhead totaled $110,000. f. Actual variable overhead totaled $168,000. Required: (1) Determine the direct materials price variance and the direct materials usage variance. (2) Determine the direct labor rate variance and the direct labor efficiency variance. (3) Determine the four overhead variances. (4) Prepare journal entry to record materials acquisition. (5) Prepare journal entry to record materials requisition (6) Prepare journal entry to record the use of labor. (7) Prepare journal entry to record applied overhead. (8) Prepare journal entry to set up overhead variances. (9) Prepare the necessary closing entries. 2. ABC Company produces engine parts for large motors. The firm uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products (a valve) is as follows: Direct materials (6 lbs. @$5.4) $32.4 Direct labor (1.5 hrs. @$18) $27 Variable overhead (1.5 hrs. @$4) $6 Fixed overhead (1.5 hrs. @$3) $4.5 Standard unit cost $69.9 The accountant computes its overhead rates using normal activity which is 20,000 units per year. The actual operating data for the year are as follows: a. Production of valves totaled 20,600 units. b. A total of 135,400 pounds of direct materials was purchased at $725,744. c. Direct materials used: 130,000 pounds. d. The company used 30,500 direct labor hours at a total cost of $579,500. e. Actual fixed overhead totaled $110,000. f. Actual variable overhead totaled $168,000. Required: (1) Determine the direct materials price variance and the direct materials usage variance. (2) Determine the direct labor rate variance and the direct labor efficiency variance. (3) Determine the four overhead variances. (4) Prepare journal entry to record materials acquisition. (5) Prepare journal entry to record materials requisition (6) Prepare journal entry to record the use of labor. (7) Prepare journal entry to record applied overhead. (8) Prepare journal entry to set up overhead variances. (9) Prepare the necessary closing entries