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Accounting: Computing Variances

Sven Enterprises is a large producer of gourmet pet food. During April it produced 147 batches of puppy meal. Each batch weighs 1000 pounds. To produce this quantity of output, the company purchased and used 148,450 pounds of direct materials at a cost of $593,800. It also incurred direct labor costs of $17,600 for the 2200 hours worked by employees on the puppy meal crew. Manufacturing overhead incurred at the puppy meal plant during April totaled $3,625 of which $2,450 was considered fixed. Svens standard cost information for 1000 pound batches of puppy meal is as follows:

Direct materials standard price......................................... $4.20 per pound
Standard quantity allowed per batch...................................... 1,020 pounds
Direct labor standard rate................................................... .$8,50 per hour
Standard hours allowed per batch..........................................14 direct labor hours
Fixed overhead budgeted.................................................... $2,800 per month
Normal level of production.................................................. 140 batches per month
Variable overhead application rate........................................ $9.00 per batch
Fixed overhead application rate
($2,800 divided 140 batches)................................................. 20.00 per batch
Total overhead application rate...............................................$29.00 per batch

Questions:
A: Compute the materials price and quantity variances.
B. Compute the labor rate and efficiency variances.
C. Compute the manufacturing overhead spending and volume variances.
D. Record the journal entry to charge materials (at standard) to Work in Process.
E. Record the journal entry to charge direct labor (at standard) to Work in Process.
F. Record the journal entry to charge manufacturing overhead (at standard) to Work in Process.
G. Record the journal entry to transfer the 147 batches of puppy meal produced in April to Finished Goods.
H. Record the journal entry to close any over-or underapplied overhead cost to Cost of Goods Sold.

Solution Summary

Computing variances of the sales of a Company, which sells different amounts of goods of different prices.

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