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Problem #1: Standard Costing Ultra, Inc. manufactures and sells a full line of sunglasses. The company uses a standard cost system. Department managers' are held
| Problem #1: Standard Costing | |||||||||
| Ultra, Inc. manufactures and sells a full line of sunglasses. The company uses a standard cost system. Department | |||||||||
| managers' are held responsible for the explanation of the variances in their department performance reports. | |||||||||
| Recently, the variances in the Prestige line of sunglasses have been of concern. Data for the month of August is | |||||||||
| presented below. Assume beginning and ending inventory levels for WiP and FG are zero. | |||||||||
| Static Budget | Actual | ||||||||
| revenues | $600,000 | $575,000 | |||||||
| DM | $150,000 | $145,000 | |||||||
| DL | $135,000 | $142,000 | |||||||
| FOH (cost driver = DL hours) | $114,000 | $111,000 | |||||||
| gross profit | $201,000 | $177,000 | |||||||
| selling price per Prestige sunglass | $76.923 | $78.767 | |||||||
| DM (total # ounces) | 15,600 | 16,000 | |||||||
| DL rate ($ per DL hour) | $18.00 | $14.20 | |||||||
| (1) | Prepare the journal entry for the purchase of DM. (2 points) | ||||||||
| DM inventory | |||||||||
| DM spending variance | |||||||||
| accounts payable | |||||||||
| (2) | Prepare the journal entry for the release of DM into production. (2 points) | ||||||||
| WiP inventory | |||||||||
| DM efficiency variance | |||||||||
| DM inventory | |||||||||
| (3) | Prepare the journal entries for DL. (4 points) | ||||||||
| DL expense | |||||||||
| wages payable | |||||||||
| WiP inventory | |||||||||
| DL efficiency variance | |||||||||
| DL spending variance | |||||||||
| DL expense | |||||||||
| (4) | Prepare the journal entries for FOH. (4 points) | ||||||||
| FOH expenses | |||||||||
| accounts payable | |||||||||
| mfg FOH control | |||||||||
| FOH expenses | |||||||||
| WiP inventory | |||||||||
| mfg FOH control | |||||||||
| mfg FOH control | |||||||||
| FOH volume variance | |||||||||
| FOH spending variance | |||||||||
| (5) | Prepare the adjusting entries to close out the variance accounts. (4 points) | ||||||||
| DM spending variance | |||||||||
| DM efficiency variance | |||||||||
| DL spending variance | |||||||||
| DL efficiency variances | |||||||||
| FOH volume variance | |||||||||
| FOH spending variance | |||||||||
| CGS | |||||||||
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Auditing Theory And Practice
Authors: Arun Kumar & Rachana Sharma
1st Edition
8171567207, 978-8171567201
