Book: Cost Management A Strategy Emphasis by Blocher
Operational Performance Measurement: Sales, Direct-Cost Variance, and the role of nonfinancial performance measures
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:
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Direct Labor: 2 Hours at $25.00 per hour
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$50.00
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Direct material: 2 Gallons at $10.00 per gallon
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$20.00
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During December of 2013, Boron produced a total of 2,500 gallons of output and incurred the following direct manufacturing costs:
Direct labor: 4,900 worked @ an average wage rate of $19.50 per hour
Direct materials:
Purchased: 6,000 gallons @10.45 per gallon
Used in production: 5,100 gallons
Required:
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 finished goods inventory.
5. Sale, for $150 per gallon of 2,000 gallons of output. (Hint. You will need two journal entries here.)