Ex. 14-56: Journal Entries in a Standard Cost System
Boron Chemical Company produces a synthetic resin that is used in the automotive industry. The company uses a standard cost system. For each gallon of output, the following direct manufacturing costs are anticipated:
Hours Wage Rate Total/Unit
Direct labor 2 $25.00 $50.00
Gals. Cost/Gal. Total/Unit
DM 2 $10.00 $20.00
During December of 2010, Boron produced a total of 2,500 gallons of output and incurred the following direct manufacturing costs:
Gallons of output produced 2,500
DLHs worked 4,900
Actual wage rate (average) $19.50
DM purchases (gallons) 6,000
Act. DM cost/gallon purchased $10.45
Gals. Issued to production 5,100
Units (gallons) sold 2,000
Selling price per unit (gal.) $150.00
The company’s practice is to record the price variance for materials at point of purchased.
Give journal entries for the following events and transactions:
1. Purchase, on credit, of direct materials.
2. Direct materials issued to production.
3. Direct labor cost of units completed this period
4. Direct manufacturing cost (direct labor plus direct materials) of units completed and transferred to XXXXX
5. Sale, for $150 per gallon, of 2,000 gallons of output. (Hint: you will need two journal entries here.)