Instructions:

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

E8-1 and E8-2 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:

1.Two pounds of materials are needed to produce one unit.

2.Standard unit cost of materials is $8 per pound.

3.It takes one hour of labor to produce one unit.

4.Standard labor rate is $10 per hour.

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

Each Case in E8-1 and E8-2 requires the following:

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

b.Analyze the variances for materials and labor.

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

1.Materials Cost

2.Labor Cost

3.Overhead Costs

(When making these entries, include the variances.)

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

E8-1 Standard unit cost; variance analysis; journal entries1,000 units were started and finished.

Case 1: All prices and quantities for the cost elements are standard, except for materials cost, which is $8.75per pound.

Case 2: All prices and quantities for the cost elements are standard, except that 1,800 lb of materials were used.

E8-2 Standard unit cost; variance analysis; journal entries 1000 units were started and finished.

Case 1: All prices and quantities are standard, except for the labor rate, which is $10.40per hour.

Case 2: All prices and quantities are standard, except for labor hours, which totaled 850.