Slick Corporation is a small producer of synthetic motor oil. During May, the company produced 5,000 cases of lubricant. Each case contains 12 quarts of synthetic oil. To achieve this level of production, Slick purchased and used 16,500 gallons of direct materials at a cost of $20,625. It also incurred average direct labor costs of $15 per hour for the 4,200 hours worked in May by its production personnel. Manufacturing overhead for the month totaled $9.950, of which $2.200 was considered fixed. Slick's standard cost information for each case of synthetic motor oil is as follows. 1.30 per gallon Direct materials standard price Standard quantity allowed per case Direct labor standard rate Standard hours allowed per case Fixed overhead budgeted Normal level of production Variable overhead application rate Fixed overhead application rate ($2,600 = 5.200 cases) Total overhead application rate 3.25 gallons 16.00 per hour 0.75 direct labor hours 2,600 per month 5,200 cases per month 1.50 per case 0.50 per case 2.00 per case Instructions a C Compute the materials price and quantity variances. b Compute the labor rate and efficiency variances. Compute the manufacturing overhead spending and volume variances. Prepare the journal entries to: d Charge materials (at standard) to Work in Process Charge direct labor (at standard) to Work in Process. f Charge manufacturing overhead (at standard) to Work in Process. e g Transfer the cost of the 5,000 cases of synthetic motor oil produced in May to Finished Goods. h Close any over- or underapplied overhead to Cost of Goods Sold. So what? What might have caused these variances? Who might be responsible? What questions would this bring up, and who might have the answers? i Journal Entries: a. Materials Price Variance (Standard Price Actual Price) 1.25 1.30 = Actual Quantity Used X 16,500.00 x 16,500.00 X 825.00 0.05 Favorable d. Entry to charge materials to production: Work in Process Inventory 21,125 Materials Quantity Variance 325 Materials Price Variance Direct Materials Inventory To record the cost of direct materials charged to production 825 20.625 Materials Quantity Variance = X Standard Price x (Standard Quantity - Actual Quantity) 1.30 16.250.00 16,500.00 1.30 X (250.00 (325.00) Unfavorable 6. Labor Rate Variance 60,000 Actual Rate) 15.00 Actual Hours Used X 4,200.00 x 4.200.00 x 4,200.00 (Standard Rate 16.00 1.00 Favorable e. Entry to charge direct labor to production: Work in Process Inventory Labor Efficiency Variance Labor Rate Variance Direct Labor To record the cost of direct labor charged to production. Labor Hours Variance Actual Hours) 4,200.00 Standard Rate X 16.00 X 16.00 x (7,200.00 (Standard Hours 3,750.00 (450.00 Unfavorable Overhead Spending Variance - Budgeted OH at actual production Level Actual OH f. Entry to charge overhead to production: 2,200.00 Fixed = 2.600.00 - 24 5A 24 48 24 5B Cases 244A C. Actual OH f. Entry to charge overhead to production: Overhead Spending Variance = Budgeted OH at actual production Level Fixed = 2,600.00 Variable = 7,500.00 Total = 10,100.00 150.00 2,200.00 7,750.00 9.950.00 Favorable Overhead Volume Variance = Applied OH at Standard Rate Budgeted OH at actual production Level Fixed = 2,500.00 - 2,600.00 synthetic motor oil produced in May to Finished Goods Variable = Total = 7,500.00 - 10,000.00 (100.00) 7.500.00 10,100.00 Unfavorable i. So what? What might have caused these variances? Who might be responsible? What questions would this bring up, and who might have the answers? h. Entry to close overapplied overhead to cost of goods sold: Slick Corporation is a small producer of synthetic motor oil. During May, the company produced 5,000 cases of lubricant. Each case contains 12 quarts of synthetic oil. To achieve this level of production, Slick purchased and used 16,500 gallons of direct materials at a cost of $20,625. It also incurred average direct labor costs of $15 per hour for the 4,200 hours worked in May by its production personnel. Manufacturing overhead for the month totaled $9.950, of which $2.200 was considered fixed. Slick's standard cost information for each case of synthetic motor oil is as follows. 1.30 per gallon Direct materials standard price Standard quantity allowed per case Direct labor standard rate Standard hours allowed per case Fixed overhead budgeted Normal level of production Variable overhead application rate Fixed overhead application rate ($2,600 = 5.200 cases) Total overhead application rate 3.25 gallons 16.00 per hour 0.75 direct labor hours 2,600 per month 5,200 cases per month 1.50 per case 0.50 per case 2.00 per case Instructions a C Compute the materials price and quantity variances. b Compute the labor rate and efficiency variances. Compute the manufacturing overhead spending and volume variances. Prepare the journal entries to: d Charge materials (at standard) to Work in Process Charge direct labor (at standard) to Work in Process. f Charge manufacturing overhead (at standard) to Work in Process. e g Transfer the cost of the 5,000 cases of synthetic motor oil produced in May to Finished Goods. h Close any over- or underapplied overhead to Cost of Goods Sold. So what? What might have caused these variances? Who might be responsible? What questions would this bring up, and who might have the answers? i Journal Entries: a. Materials Price Variance (Standard Price Actual Price) 1.25 1.30 = Actual Quantity Used X 16,500.00 x 16,500.00 X 825.00 0.05 Favorable d. Entry to charge materials to production: Work in Process Inventory 21,125 Materials Quantity Variance 325 Materials Price Variance Direct Materials Inventory To record the cost of direct materials charged to production 825 20.625 Materials Quantity Variance = X Standard Price x (Standard Quantity - Actual Quantity) 1.30 16.250.00 16,500.00 1.30 X (250.00 (325.00) Unfavorable 6. Labor Rate Variance 60,000 Actual Rate) 15.00 Actual Hours Used X 4,200.00 x 4.200.00 x 4,200.00 (Standard Rate 16.00 1.00 Favorable e. Entry to charge direct labor to production: Work in Process Inventory Labor Efficiency Variance Labor Rate Variance Direct Labor To record the cost of direct labor charged to production. Labor Hours Variance Actual Hours) 4,200.00 Standard Rate X 16.00 X 16.00 x (7,200.00 (Standard Hours 3,750.00 (450.00 Unfavorable Overhead Spending Variance - Budgeted OH at actual production Level Actual OH f. Entry to charge overhead to production: 2,200.00 Fixed = 2.600.00 - 24 5A 24 48 24 5B Cases 244A C. Actual OH f. Entry to charge overhead to production: Overhead Spending Variance = Budgeted OH at actual production Level Fixed = 2,600.00 Variable = 7,500.00 Total = 10,100.00 150.00 2,200.00 7,750.00 9.950.00 Favorable Overhead Volume Variance = Applied OH at Standard Rate Budgeted OH at actual production Level Fixed = 2,500.00 - 2,600.00 synthetic motor oil produced in May to Finished Goods Variable = Total = 7,500.00 - 10,000.00 (100.00) 7.500.00 10,100.00 Unfavorable i. So what? What might have caused these variances? Who might be responsible? What questions would this bring up, and who might have the answers? h. Entry to close overapplied overhead to cost of goods sold