Esteban Products produces instructional aids, including white boards, which use colored markers instead of chalk. These are particularly popular for conference rooms in educational institutions and executive offices of large corporations. The standard cost of materials for this product is 12 pounds at $8.75 per pound.

During the first month of the year, 3,700 boards were produced. Information concerning actual costs and usage of materials follows:

Materials purchased	44,000 lbs. @ $8.85
Materials used	43,500 lbs.

Required:

1.

Compute the materials price and usage variances.

2.

Prepare journal entries on Jan. 31 for all activity relating to materials.

1. Compute the materials price and usage variances.

Materials price variance
Materials usage variance

none

X

Chart of Accounts

CHART OF ACCOUNTS

General Ledger

	ASSETS
110	Cash
120	Accounts Receivable
131	Supplies
132	Prepaid Insurance
141	Materials
142	Work in Process
143	Overhead Control
144	Finished Goods
170	Land
180	Equipment
181	Accumulated Depreciation

	LIABILITIES
210	Accounts Payable
220	Accrued Payroll
230	Utilities Payable
240	Lease Payable

	EQUITY
310	Common Stock
320	Retained Earnings

	REVENUE
410	Sales

	EXPENSES
510	Cost of Goods Sold
511	Materials Price Variance
512	Materials Usage Variance
513	Labor Efficiency Variance
514	Labor Rate Variance
520	Insurance Expense
530	Wages Expense
540	Supplies Expense
550	Utilities Expense
560	Depreciation Expense
590	Miscellaneous Expense

none

X

Materials Variances

1. Compute the materials price and usage variances.

Materials price variance		selector 1 Unfavorable Favorable
Materials usage variance		selector 2 Unfavorable Favorable

Points:

Feedback

Explanation

none

X

Journal

2. Prepare journal entries on Jan. 31 for all activity relating to materials. Refer to the Chart of Accounts for the exact wording of account titles.

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GENERAL JOURNAL

	DATE	ACCOUNT	POST. REF.	DEBIT	CREDIT
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