Question

Hart Company made 3,040 bookshelves using 22,040 board feet of wood costing $271,092. The company's direct materials standards for one bookshelf are 8 board feet of wood at $12.20 per board foot.
AQ = Actual Quantity SQ = Standard Quantity AP = Actual Price SP = Standard Price (1) Compute the direct materials price and quantity variances and classify each as favorable or unfavorable. (2) Hart applies management by exception by investigating direct materials variances of more than 5% of actual direct materials costs. Which direct materials variances will Hart investigate further? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the direct materials price and quantity variances and classify each as favorable or unfavorable. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.) Actual Cost Standard Cost $ 0 Required 1 Required 2 > Required 1 Required 2 Hart applies management by exception by investigating direct materials variances of more than 5% of actual direct materials costs. Which direct materials variances will Hart investigate further? Which direct materials variances will Hart investigate further? Direct lapor enciency variance ( Required 1 Direct labor rate variance Direct materials price variance Direct materials quantity variance Total direct materials variance Total variable overhead cost variance (1) Prepare the journal entry to charge direct materials costs to Work in Process Inventory and record the materials variances.
(2) Assume that Hart's materials variances are the only variances accumulated in the accounting period and that they are immaterial. Prepare the adjusting journal entry to close the variance accounts at period-end. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entry to charge direct materials costs to Work in Process Inventory and record the materials variances. View transaction list Journal entry worksheet Record price and quantity variances. Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry Clear entry View general journal View transaction list Journal entry worksheet Record closing of price and quantity variances to cost of goods sold. Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry Clear entry View general journal

Answer 1

1. a. The computation of the direct materials price variance is as follows:

= $2,204 ($12.20 - $12.30) x 22,040) Unfavorable

1.b. The computation of the direct materials quantity variance is as follows:

= $27,816 (24,320 - 22,040) x $12.20) Favorable

2. The direct materials variance that Hart will investigate further is the direct materials quantity variance, which is 10.3% ($27,816/$271,092 x 100) of the actual direct materials costs instead of the direct materials price variance, which is only 0.8% of the actual direct materials costs.

3. The journal entry to charge direct materials costs to Work in Process Inventory and record and close the materials variances are as follows:

a. Recording the Direct Materials Costs and Variances

Debit Work in Process $296,704 ($12.20 x 8 x 3,040)

Debit Direct Materials Price Variance $2,204

Credit Direct Materials Quantity Variance $27,816

Credit Raw Materials $271,092

• To record the charge of direct materials to work in process based on standard cost.

b. Closing the Direct Materials Variances:

Debit Direct Materials Quantity Variance $27,816

Credit Direct Materials Price Variance $2,204

Credit Cost of Goods Sold $25,612

• To close direct materials variances to the cost of goods sold.

Data and Calculations:

Units of bookshelves produced = 3,040

Feet of board used = 22,040

Cost of board feet of wood = $271,092

Per Unit        Standard     Actual

Price               $12.20      $12.30 ($271,092/22,040)

Board feet        8              7.25 (22,040/3,040)

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