Direct Materials, Direct Labor, and Overhead Variances, Journal Entries

Rand Company produces dry fertilizer. At the beginning of the year, Rand had the following standard cost sheet:

Direct materials $(5$ lbs$.$ @ $$2\mathrm{.}60)$ $$13\mathrm{.}00$

Direct labor $(0\mathrm{.}75$ hr$.$ @ $$18\mathrm{.}00)13\mathrm{.}50$

Fixed overhead $(0\mathrm{.}75$ hr$.$ @ $$4\mathrm{.}00)3\mathrm{.}00$

Variable overhead $(0\mathrm{.}75$ hr$.$ @ $$3\mathrm{.}00)2\mathrm{.}25$

Standard cost per unit $$31\mathrm{.}75$

Overhead rates are computed using practical volume, which is $54,000$ units. The actual results for the year are as follows:

Units produced: $53,000$

Direct materials purchased: $265,000$ pounds @ $$2\mathrm{.}50$ per pound

Direct materials used: $270,200$ pounds

Direct labor: $40,100$ hours at $$17\mathrm{.}95$ per hour

Fixed overhead: $$161,800$

Variable overhead: $$122,100$f$.$ Prepare journal entries for the closing out of variances to Cost of Goods Sold. If an amount box does not require an entry, leave it blank.

First, close direct materials and direct labor variances:

Second, recognize the overhead variances:

Third, close the overhead variances:

Note: Close the variances with a debit balance first.

Cost of Goods Sold

Fixed Overhead Volume Variance $v$

Variable Overhead Spendina Variance $$

Variable Overhead Efficiency Variance $$

Fixed Overhead Spending Variance $$

Cost of Goods Sold $$