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	$625,000
DM				$150,000	$163,400
DL				$135,000	$138,700
FOH (cost driver = DL hours)				$114,000	$121,000
gross profit				$201,000	$201,900
selling price per Prestige sunglass				$76.92	$76.22
DM (total # ounces)				15,600	16,100
DL rate ($ per DL hour)				$18.00	$19.55

1-Prepare the journal entry for the purchase of DM. Assume DM ourchases = DM used.

-DM inventory

-DM spending Variance

-Accounts payable

2-Prepare the journal entry for the release of DM into production.

-WiP inventory

-DM efficiency variance

-DM inventory

3-Prepare the journal entries for DL.

A

-DL expense

-Wage payable.

B-

-WiP inventory

-DL efficiency variance

-DL spending variance

-DL expense

4-Prepare the journal entries for FOH.

A-

-FOH expenses

-accounts payable

B-

-mfg FOH control

- FOH expenses

C-

-WIP inventory

-mfg OH control

D-

-mfg FOH control

-FOH volume variance

-FOH spending Variance

5-Prepare the adjusting entries to close out the variance accounts

DM spending variance

CGS

DM efficiency variance

CGS

DL spending variance

CGS

DL efficiency variances

CGS

FOH volume variance

CGS

FOH spending variance

CGS