Flexible Budget, Standard Cost Variances, T-Accounts

Ingles Company manufactures external hard drives. At the beginning of the period, the following plans for production and costs were revealed:

Units to be produced and sold	25,000
Standard cost per unit:
Direct materials	$ 10
Direct labor	8
Variable overhead	4
Fixed overhead	3
Total unit cost	$ 25

During the year, 24,800 units were produced and sold. The following actual costs were incurred:

Direct materials	$264,368
Direct labor	204,352
Variable overhead	107,310
Fixed overhead	73,904

There were no beginning or ending inventories of direct materials. The direct materials price variance was $10,168 unfavorable. In producing the 24,800 units, a total of 12,772 hours were worked, 3 percent more hours than the standard allowed for the actual output. Overhead costs are applied to production using direct labor hours.

Required:

Use T-accounts to show the flow of costs through the system. In showing the flow, you do not need to show detailed overhead variances. Show only the over- and underapplied variances for fixed and variable overhead. Record the following transactions in the T-accounts: If an amount is zero, enter "0".

(a) purchase of materials,

(b) issuance of materials into production,

(c) incurrence of direct labor cost,

(d) application of variable overhead cost to production,

(e) application of fixed overhead cost to production,

(f) transfer of finished goods to finished goods inventory,

(g) sale of goods,

(h) closure of Direct Materials Price Variance account,

(i) closure of Direct Materials Usage Variance account,

(j) closure of Direct Labor Efficiency Variance account,

(k) closure of Variable Overhead Control account, and

(l) closure of Fixed Overhead Control account.

Enter these transactions in the T-accounts in the same order that they are presented here.

Materials 248,000 (6) (b) 248,000 Work in Process 248,000 (0) 620,600 198,400 (b) c) d) (e) 99,200 75,000 Finished Goods (0) 620,6009) 620,600 Direct Materials Price Variance 10,168 (1) 10,168 Direct Materials Usage Variance (6) 6,2000) 6,200 Accounts Payable 264,368 Wages Payable (c) 204,352 Direct Labor Rate Variance 0 Direct Labor Efficiency Variance 5,952 (k) (0) 5,952 Variable Overhead Control 107,310 Fixed Overhead Control 73,904 Cost of Goods Sold 10,168 6,200 5,952