Question
nKate Company has established the following standards for the production of its finished units: Direct Materials (5 lbs per unit @ $8.00 per lb) $
nKate Company has established the following standards for the production of its finished units:
Direct Materials (5 lbs per unit @ $8.00 per lb) $ Direct Labor (8 dl hrs per unit @ $20 per dl hr)
Variable Overhead (6 machine hrs per unit @ $9 per mach hr) Fixed Overhead (6 machine hrs per unit @ $12 per mach hr*)
Total Standard Cost of one Finished Unit $
40.00 160.00 54.00 72.00 326.00
(*the fixed overhead rate was based on a budgeted production level of 7,500 units)
The following information is available for the year 2020:
Actual production for the period was 8,000 units. 50,000 pounds of direct materials were purchased on account for $7.80 per pound. 42,000 pounds of direct materials were used in production. 65,000 direct labor hours were used and the actual labor rate paid was $21 per direct labor hour. The total actual
variable overhead costs (paid in cash) were $410,000 and the total actual fixed overhead costs (paid in cash) were $550,000. 45,000 machine hours were used. 7,800 units were sold for $500 per unit cash.
REQUIRED:
- Compute the eight production variances--be sure to label each variance and indicate whether the variance is favorable or unfavorable.
- Prepare ALL of the standard costing journal entries necessary for the year.
- What amount of gross profit will be reported on the 2020 income statement?
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