Seven Enterprises is a large producer of gourmet pet food. During April, it prod

Question

Seven Enterprises is a large producer of gourmet pet food. During April, it produced 147 batches of puppy meal. Each batch weighs 1,000 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 COST OF $17, 600 for the 2,200 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. Seven’s standard cost information for 1,000-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
($2,800/140 batches)………………………………… 20.00 per batch
Total overhead application rate………………… $29.00 per batch

Instructions
a. compute the materials price and quantity variances
b. Compute the labor rate and efficiency variances
c. Compute the manufacturing overhead spending and volume variance
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 under applied overhead to cost of goods sold

Explanation / Answer

Materials price variance =4.20 x 148,450-593,800=29,690 ------------favorable)

Materials quantity variance = 4.20 x   (147,000-148,450)=-6,090 --------unfavorable)

Labor rate variance =2200      x 8.50-17600=1100 ------------favorable)

Labor efficiency variance =8.50 x (147*14-2200)=-1207-----------unfavorable)

Work in process Inventory (at standard cost) ------------        617,400

   Materials Quantity variance (unfavorable)----------           6,090

     Materials Price Variance (favorable) ---------                       29,690

  Direct Materials Inventory (at actual cost) -----           593,800

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