Basic Variance Analysis, Revision of Standards, Journal Entries Petrillo Company produces engine parts for large motors The company 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 (7 lbs $5 40) $37 80 Direct labor (1 75 hrs $18) 31 50 Variable overhead (1 75 hrs $4 00) 7 00 Fixed overhead (1 75 hrs $3 00) 5 25 Standard cost per unit $81 55 During the year, Petrillo had the following activity related to valve production Production of valves totaled 20,600 units A total of 135,400 pounds of direct materials was purchased at $5 36 per pound There were 10,000 pounds of direct materials in beginning inventory (carried at $5 40 per pound) There was no ending inventory The company used 36,500 direct labor hours at a total cost of $656,270 Actual fixed overhead totaled $111,000 Actual variable overhead totaled $170,000 Petrillo produces all of its valves in a single plant Normal activity is 20,000 units per year Standard overhead rates are computed based on normal activity measured in standard direct labor hours Required 1 Compute the direct materials price and usage variances MPV $fill in the blank bc2c3b0dafdd022 1 FavorableUnfavorable MUV $fill in the blank bc2c3b0dafdd022 3 FavorableUnfavorable 2 Compute the direct labor rate and efficiency variances Labor Rate Variance $fill in the blank bc2c3b0dafdd022 5 FavorableUnfavorable Labor Efficiency Variance $fill in the blank bc2c3b0dafdd022 7 FavorableUnfavorable 3 Compute overhead variances using a two variance analysis Budget Variance $fill in the blank bc2c3b0dafdd022 9 FavorableUnfavorable Volume Variance $fill in the blank bc2c3b0dafdd022 11 FavorableUnfavorable 4 Compute overhead variances using a four variance analysis Variable overhead spending variance $fill in the blank Favorable Unfavorable Variable overhead efficiency variance $fill in the blank Favorable Unfavorable Fixed overhead spending variance $fill in the blank Favorable Unfavorable Fixed overhead volume variance $fill in the blank Favorable Unfavorable 5 Assume that the purchasing agent for the valve plant purchased a lower quality direct material from a new supplier Would you recommend that the company continue to use this cheaper direct material YesNo 6 Prepare all possible journal entries (assuming a four variance analysis of overhead variances) For compound entries, if an amount box does not require an entry, leave it blank a Record materials purchase Materials Miscellaneous Accounts Variable Overhead Control Variable Overhead Efficiency Variance Variable Overhead Spending Variance Select Select Direct Materials Price Variance Direct Materials Usage Variance Fixed Overhead Control Fixed Overhead Spending Variance Fixed Overhead Volume Variance Select Select Accounts Payable Cost of Goods Sold Direct Labor Efficiency Variance Direct Labor Rate Variance Direct Materials Usage Variance Select Select b Record materials usage Variable Overhead Control Variable Overhead Efficiency Variance Variable Overhead Spending Variance Wages Payable Work in Process Select Select Cost of Goods Sold Direct Labor Efficiency Variance Direct Labor Rate Variance Direct Materials Price Variance Direct Materials Usage Variance Select Select Materials Miscellaneous Accounts Variable Overhead Control Variable Overhead Efficiency Variance Variable Overhead Spending Variance Select Select c Record direct labor Variable Overhead Control Variable Overhead Efficiency Variance Variable Overhead Spending Variance Wages Payable Work in Process Select Select Direct Labor Efficiency Variance Direct Labor Rate Variance Direct Materials Price Variance Direct Materials Usage Variance Fixed Overhead Control Select Select Accounts Payable Cost of Goods Sold Direct Labor Efficiency Variance Direct Labor Rate Variance Direct Materials Price Variance Select Select Variable Overhead Control Variable Overhead Efficiency Variance Variable Overhead Spending Variance Wages Payable Work in Process Select Select d Close materials usage and labor variances to CGS Accounts Payable Cost of Goods Sold Direct Labor Efficiency Variance Direct Materials Price Variance Direct Materials Usage Variance Select Select Accounts Payable Direct Labor Efficiency Variance Direct Labor Rate Variance Direct Materials Price Variance Direct Materials Usage Variance Select Select Accounts Payable Cost of Goods Sold Direct Labor Rate Variance Direct Materials Price Variance Direct Materials Usage Variance Select Select Accounts Payable Cost of Goods Sold Direct Labor Efficiency Variance Direct Labor Rate Variance Direct Materials Price Variance Select Select e Close price variance to CGS Direct Materials Price Variance Direct Materials Usage Variance Fixed Overhead Control Fixed Overhead Spending Variance Fixed Overhead Volume Variance Select Cost of Goods Sold Direct Labor Efficiency Variance Direct Labor Rate Variance Direct Materials Price Variance Direct Materials Usage Variance Select f Record actual variable overhead Variable Overhead Control Variable Overhead Efficiency Variance Variable Overhead Spending Variance Wages Payable Work in Process Select Miscellaneous AccountsVariable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceWages Payable Select g Record actual fixed overhead Direct Labor Efficiency VarianceDirect Labor Rate VarianceDirect Materials Price VarianceDirect Materials Usage VarianceFixed Overhead Control Select Variable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceVarious AccountsWages Payable Select h Apply variable overhead Variable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceWages PayableWork in Process Select Variable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceWages PayableWork in Process Select i Apply fixed overhead Variable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceWages PayableWork in Process Select Fixed Overhead ControlFixed Overhead Spending VarianceFixed Overhead Volume VarianceMaterialsMiscellaneous Accounts Select j Record overhead variances Cost of Goods SoldFixed Overhead ControlFixed Overhead Volume VarianceVariable Overhead Spending VarianceWork in Process Select Select Accounts PayableFixed Overhead ControlFixed Overhead Volume VarianceVariable Overhead Efficiency VarianceWork in Process Select Select Cost of Goods SoldFixed Overhead ControlFixed Overhead Spending VarianceFixed Overhead Volume VarianceWork in Process Select Select Cost of Goods SoldFixed Overhead Spending VarianceFixed Overhead Volume VarianceMaterialsMiscellaneous Accounts Select Select Cost of Goods SoldDirect Labor Efficiency VarianceFixed Overhead ControlFixed Overhead Spending VarianceVariable Overhead Spending Variance Select Select Variable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceWages PayableWork in Process Select Select k Close spending and efficiency variances to CGS Cost of Goods SoldDirect Labor Efficiency VarianceDirect Labor Rate VarianceDirect Materials Price VarianceDirect Materials Usage Variance Select Select Cost of Goods SoldFixed Overhead Volume VarianceVariable Overhead ControlVariable Overhead Efficiency VarianceWork in Process Select Select Cost of Goods SoldFixed Overhead Spending VarianceFixed Overhead Volume VarianceVariable Overhead ControlWork in Process Select Select Accounts PayableCost of Goods SoldVariable Overhead ControlVariable Overhead Spending VarianceWork in Process Select Select l Close volume variance to CGS Fixed Overhead ControlFixed Overhead Spending VarianceFixed Overhead Volume VarianceMaterialsMiscellaneous Accounts Select

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Basic Variance Analysis, Revision of Standards, Journal Entries Petrillo Company produces engine parts for large motors. The company uses a standard cost system for production

Basic Variance Analysis, Revision of Standards, Journal Entries

Petrillo Company produces engine parts for large motors. The company 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 (7 lbs. @ $5.40)	$37.80
Direct labor (1.75 hrs. @ $18)	31.50
Variable overhead (1.75 hrs. @ $4.00)	7.00
Fixed overhead (1.75 hrs. @ $3.00)	5.25
Standard cost per unit	$81.55

During the year, Petrillo had the following activity related to valve production:

Production of valves totaled 20,600 units.
A total of 135,400 pounds of direct materials was purchased at $5.36 per pound.
There were 10,000 pounds of direct materials in beginning inventory (carried at $5.40 per pound). There was no ending inventory.
The company used 36,500 direct labor hours at a total cost of $656,270.
Actual fixed overhead totaled $111,000.
Actual variable overhead totaled $170,000.

Petrillo produces all of its valves in a single plant. Normal activity is 20,000 units per year. Standard overhead rates are computed based on normal activity measured in standard direct labor hours.

Required:

1. Compute the direct materials price and usage variances.

MPV	$fill in the blank bc2c3b0dafdd022_1	FavorableUnfavorable
MUV	$fill in the blank bc2c3b0dafdd022_3	FavorableUnfavorable

2. Compute the direct labor rate and efficiency variances.

Labor Rate Variance	$fill in the blank bc2c3b0dafdd022_5	FavorableUnfavorable
Labor Efficiency Variance	$fill in the blank bc2c3b0dafdd022_7	FavorableUnfavorable

3. Compute overhead variances using a two-variance analysis.

Budget Variance	$fill in the blank bc2c3b0dafdd022_9	FavorableUnfavorable
Volume Variance	$fill in the blank bc2c3b0dafdd022_11	FavorableUnfavorable

4. Compute overhead variances using a four-variance analysis.

Variable overhead spending variance	$fill in the blank	Favorable/Unfavorable
Variable overhead efficiency variance	$fill in the blank	Favorable/Unfavorable
Fixed overhead spending variance	$fill in the blank	Favorable/Unfavorable
Fixed overhead volume variance	$fill in the blank	Favorable/Unfavorable

5. Assume that the purchasing agent for the valve plant purchased a lower-quality direct material from a new supplier. Would you recommend that the company continue to use this cheaper direct material?

YesNo

6. Prepare all possible journal entries (assuming a four-variance analysis of overhead variances). For compound entries, if an amount box does not require an entry, leave it blank.

a.	Record materials purchase
	Materials/Miscellaneous Accounts/Variable Overhead Control/Variable Overhead Efficiency Variance/Variable Overhead Spending Variance	- Select -	- Select -
	Direct Materials Price Variance/Direct Materials Usage Variance/Fixed Overhead Control/Fixed Overhead Spending Variance/Fixed Overhead Volume Variance	- Select -	- Select -
	Accounts Payable/Cost of Goods Sold/Direct Labor Efficiency Variance/Direct Labor Rate Variance/Direct Materials Usage Variance	- Select -	- Select -
b.	Record materials usage
	Variable Overhead Control/Variable Overhead Efficiency Variance/Variable Overhead Spending Variance/Wages Payable/Work in Process	- Select -	- Select -
	Cost of Goods Sold/Direct Labor Efficiency Variance/Direct Labor Rate Variance/Direct Materials Price Variance/Direct Materials Usage Variance	- Select -	- Select -
	Materials/Miscellaneous Accounts/Variable Overhead Control/Variable Overhead Efficiency Variance/ Variable Overhead Spending Variance	- Select -	- Select -
c.	Record direct labor
	Variable Overhead Control/Variable Overhead Efficiency Variance/Variable Overhead Spending Variance/Wages Payable/Work in Process	- Select -	- Select -
	Direct Labor Efficiency Variance/Direct Labor Rate Variance/Direct Materials Price Variance/Direct Materials Usage Variance/Fixed Overhead Control	- Select -	- Select -
	Accounts Payable/Cost of Goods Sold/Direct Labor Efficiency Variance/Direct Labor Rate Variance/Direct Materials Price Variance	- Select -	- Select -
	Variable Overhead Control/Variable Overhead Efficiency Variance/Variable Overhead Spending Variance/Wages Payable/Work in Process	- Select -	- Select -
d.	Close materials usage and labor variances to CGS
	Accounts Payable/Cost of Goods Sold/Direct Labor Efficiency Variance/Direct Materials Price Variance/Direct Materials Usage Variance	- Select -	- Select -
	Accounts Payable/Direct Labor Efficiency Variance/Direct Labor Rate Variance/Direct Materials Price Variance/Direct Materials Usage Variance	- Select -	- Select -
	Accounts Payable/Cost of Goods Sold/Direct Labor Rate Variance/Direct Materials Price Variance/Direct Materials Usage Variance	- Select -	- Select -
	Accounts Payable/Cost of Goods Sold/Direct Labor Efficiency Variance/Direct Labor Rate Variance/Direct Materials Price Variance	- Select -	- Select -
e.	Close price variance to CGS
	Direct Materials Price Variance/Direct Materials Usage Variance/Fixed Overhead Control/Fixed Overhead Spending Variance/Fixed Overhead Volume Variance	- Select -
	Cost of Goods Sold/Direct Labor Efficiency Variance/Direct Labor Rate Variance/Direct Materials Price Variance/Direct Materials Usage Variance		- Select -
f.	Record actual variable overhead
	Variable Overhead Control/Variable Overhead Efficiency Variance/Variable Overhead Spending Variance/Wages Payable/Work in Process	- Select -
	Miscellaneous AccountsVariable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceWages Payable		- Select -
g.	Record actual fixed overhead
	Direct Labor Efficiency VarianceDirect Labor Rate VarianceDirect Materials Price VarianceDirect Materials Usage VarianceFixed Overhead Control	- Select -
	Variable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceVarious AccountsWages Payable		- Select -
h.	Apply variable overhead
	Variable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceWages PayableWork in Process	- Select -
	Variable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceWages PayableWork in Process		- Select -
i.	Apply fixed overhead
	Variable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceWages PayableWork in Process	- Select -
	Fixed Overhead ControlFixed Overhead Spending VarianceFixed Overhead Volume VarianceMaterialsMiscellaneous Accounts		- Select -
j.	Record overhead variances
	Cost of Goods SoldFixed Overhead ControlFixed Overhead Volume VarianceVariable Overhead Spending VarianceWork in Process	- Select -	- Select -
	Accounts PayableFixed Overhead ControlFixed Overhead Volume VarianceVariable Overhead Efficiency VarianceWork in Process	- Select -	- Select -
	Cost of Goods SoldFixed Overhead ControlFixed Overhead Spending VarianceFixed Overhead Volume VarianceWork in Process	- Select -	- Select -
	Cost of Goods SoldFixed Overhead Spending VarianceFixed Overhead Volume VarianceMaterialsMiscellaneous Accounts	- Select -	- Select -
	Cost of Goods SoldDirect Labor Efficiency VarianceFixed Overhead ControlFixed Overhead Spending VarianceVariable Overhead Spending Variance	- Select -	- Select -
	Variable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceWages PayableWork in Process	- Select -	- Select -
k.	Close spending and efficiency variances to CGS
	Cost of Goods SoldDirect Labor Efficiency VarianceDirect Labor Rate VarianceDirect Materials Price VarianceDirect Materials Usage Variance	- Select -	- Select -
	Cost of Goods SoldFixed Overhead Volume VarianceVariable Overhead ControlVariable Overhead Efficiency VarianceWork in Process	- Select -	- Select -
	Cost of Goods SoldFixed Overhead Spending VarianceFixed Overhead Volume VarianceVariable Overhead ControlWork in Process	- Select -	- Select -
	Accounts PayableCost of Goods SoldVariable Overhead ControlVariable Overhead Spending VarianceWork in Process	- Select -	- Select -
l.	Close volume variance to CGS
	Fixed Overhead ControlFixed Overhead Spending VarianceFixed Overhead Volume VarianceMaterialsMiscellaneous Accounts	- Select -