Deporte Company produces singlecolored tshirts Materials for

Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established:

1

Direct materials (2.8 lbs. @ $0.80)

$2.24

2

Direct labor (0.75 hr. @ $7.8)

5.85

3

Standard prime cost

$8.09

During the year, 79,300 pounds of material were purchased and used for the changeover activity. There were 26,000 batches produced, with the following actual prime costs:

Direct materials $50,946

Direct labor (for 19,457 hrs.) $149,386

Prepare the Dec. 31 journal entries for the (1) purchase of raw materials, (2) issuance of raw materials, (3) addition of labor to Work in Process, and the (4) closing of variances to Cost of Goods Sold. Refer to the Chart of Accounts for the exact wording of account titles. Record each transaction as a compound entry.

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GENERAL JOURNAL

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1	Direct materials (2.8 lbs. @ $0.80)	$2.24
2	Direct labor (0.75 hr. @ $7.8)	5.85
3	Standard prime cost	$8.09

Solution

Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Raw Materials      63,440.00 $0.80 X 79,300 lbs Material Price Variance      12,494.00 Accounts Payable      50,946.00 (record the raw materials purcahsed) 2 Work in Process      58,240.00 $0.80 X 72,800 lbs Material Usage Variance        5,200.00 Raw Materials      63,440.00 $0.80 X 79,300 lbs (record the raw materials issued to WIP) 3 Work in Process    152,100.00 $7.8 X 19,500 hrs Labor Rate Variance        2,378.60 Labor Efficiency Variance            335.40 Accrued Payroll    149,386.00 (record the Labor used in Production) 4 Material Price Variance      12,494.00 Labor Rate Variance        2,378.60 Labor Efficiency Variance            335.40 Material Usage Variance        5,200.00 Cost of Goods Sold      10,008.00 (record the closing of variances) Material Price Variance = (SR - AR) X AQ Material Price Variance = ($0.80 - $0.64) X 79,300 Pounds Material Price Variance = $12,494 (F) Material Usage Variance = (SQ - AQ) X SR Material Usage Variance = (72,800 lbs - 79,300 lbs) X $0.80 Material Usage Variance = $5,200 (U) Labor Rate Variance = (SR - AR) X AH Labor Rate Variance = ($7.80 - $7.68) X 19,457 hrs Labor Rate Variance = $2,378.60 (F) Labor Efficiency Variance = (SH - AH) X SR Labor Efficiency Variance = (19,500 hrs - 19,457 Hrs) X $7.80 Labor Efficiency Variance = $335.40 (F)