Problem 23-6A (Part Level Submission) Jorgensen Corporation uses standard costs
ID: 2557852 • Letter: P
Question
Problem 23-6A (Part Level Submission)
Jorgensen Corporation uses standard costs with its job order cost accounting system. In January, an order (Job No. 12) for 1,300 units of Product B was received. The standard cost of one unit of Product B is as follows.
Normal capacity for the month was 4,490 machine hours. During January, the following transactions applicable to Job No. 12 occurred.
Prepare the entry to recognize the total overhead variance. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
Direct materials 3 pounds at $1.30 per pound $3.90 Direct labor 1.20 hour at $9.00 per hour 10.80 Overhead 2 hours (variable $4.20 per machine hour; fixed $3.40 per machine hour) 15.20 Standard cost per unit $29.90Explanation / Answer
It is given that the standard Overhead cost is = $15.20 for 2 hours. i.e. for one hour it 15.2/2 = 7.60 per hour.
Standard overhead hours per unit = 2 hours
Total number of units = 1300 units
Total standard hours (1300x2) = 2600 hours
Total standard overheads = Total hours x Rate per hour
= 2,600x 7.60 per hours = $19,760
Total actual overheads = $21,850
As the actual overheads are more than the standard overheads the variance will be adverse by 2090 Adverse (21850-19760).
As it is an adverse variance it is a loss for the company and it will be charged to cost of goods sold. we will debit the standard cost and the adverse variabce and credit the accounts payable as these expenses are due.
Standard overhead cost A/c Dr. 19,760
Adverse variance A/c Dr. 2,090
To Accounts payable A/c 21850
(Expenses booked and adverse variance debited)
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