In all of the exercises involving variances, use F and U to designate favorable and unfavorable variances, respectively.

E8-1 through E8-5 use the following data:

The standard operating capacity of Tecate Manufacturing Co. is 1,000 units. A detailed study of the manufacturing data relating to the standard production cost of one product revealed the following:

Two pounds of materials are needed to produce one unit.

Standard unit cost of materials is $8 per pound.

It takes one hour of labor to produce one unit.

Standard labor rate is $10 per hour.

Standard overhead (all variable) for this volume is $4,000.

Each case in E8-1 through E8-5 requires the following:

Set up a standard cost summary showing the standard unit cost.

Analyze the variances for materials and labor.

Make journal entries to record the transfer to Work in Process of:

Materials costs

Labor costs

Overhead costs

(When making these entries, include the variances.)

Prepare the journal entry to record the transfer of costs to the finished goods account.

E8-1

Standard Unit Cost; Variance Analysis; Journal Entries

LO2, LO3, LO4

1,000 units were started and finished.

Case 1: All prices and quantities for the cost elements are standard, except for materials cost, which is $8.50 per pound.

Case 2: All prices and quantities for the cost elements are standard, except that 1,900 lb of materials were used.

Standard Unit Cost; Variance Analysis; Journal Entries

The standard operating capacity of Tecate Manufacturing Co. is 1,000 units. A detailed study of the manufacturing data relating to the standard production cost of one product revealed the following:

Two pounds of materials are needed to produce one unit.

Standard unit cost of materials is $8 per pound.

It takes one hour of labor to produce one unit.

Standard labor rate is $10 per hour.

Standard overhead (all variable) for this volume is $4,000.

All of the deviations listed in E8-1 and E8-2 took place, and 900 units were started and finished.

a. Set up a standard cost summary showing the standard unit cost.

material
labor
factory overhead
labor efficiency variance

b. Analyze the variances for materials and labor. Use "F" and "U" to designate favorable and unfavorable variances. If an amount is zero, enter "0" and use "NA" if the variance is zero. Enter all amounts as positive numbers

material price variance
material quantity variance
labor rate variance
labor efficiency variance