Vista Company installed a standard cost system on January 1. Selected transactions for the month of January are as follows. 1. Purchased 17,900 units of raw materials on account at a cost of $2.80 per unit. Standard cost was $2.60 per unit. 2. Issued 17,900 units of raw materials for jobs that required 17,520 standard units of raw materials. 3. Incurred 15,000 actual hours of direct labor at an actual rate of $4.80 per hour. The standard rate is $5.20 per hour. (Credit Factory Wages Payable.) 4. Performed 15,000 hours of direct labor on jobs when standard hours were 15,200. 5. Applied overhead to jobs at the rate of 100% of direct labor cost for standard hours allowed. Journalize the January transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) (Round answers to 0 decimal places, e. g. 125.)

Answer and Explanation:

The Journal entry is shown below :-

1. Raw Materials Inventory Dr, $46,540

  Materials Price Variance Dr, $3,580

                    To Accounts Payable $50,120

(Being accounts payable is recorded)

Working note

Materials price variance = (Actual price - Standard Price) × Actual Quantity

= ($2.80 - $2.60) × 17,900

= $3,580 Unfavorable

Raw Material = Actual Quantity × Standard Price

= 17,900 × $2.60

= $46,540

Accounts Payable = Actual Quantity × Actual price

= 17,900 × $2.80

= $50,120

2. Work in Process Inventory Dr, $45,552

    Materials Quantity Variance Dr, $988

                  To Raw Materials Inventory $46,540

(Being raw material inventory is recorded)

Working Note

Materials quantity variance = (Actual Quantity Used- Standard Quantity) × Standard Price

= (17,900 - 17,520) × $2.60

= $988 Unfavorable

Work in Process Inventory = Standard Quantity × Standard Price

= 17,520 × $2.60

= $45,552

Raw Material = Actual Quantity × Standard Price

= 17,900 × $2.60

= $46,540

3. Factory Labor Dr, $78,000

            To Labor Price Variance $6,000

             To Factory Wages Payable $72,000

(Being factory labor is recorded)

Working Note:-

Labor price variance = (Actual Rate - Standard Rate) × Actual Hour

= ($4.80 - $5.20) × 15,000

= $6,000 Favorable

Factory labor = Standard Rate × Actual Hour

= $5.20 × 15,000

= $78,000

Factory Wages Payable = Actual Rate × Actual Hour

= $4.80 × 15,000

= $72,000

4. Work in Process Inventory Dr, $79,040

            To Labor Quantity Variance $1,040

            To Factory Labor $78,000

(Being work in progress is recorded)

Working note

Labor Quantity variance = (Actual Hour - Standard Hour) × Standard Rate

= (15,000 - 15,200) × $5.20

= $1,040

Work in Process Inventory = Standard Hour × Standard Rate

= 15,200 × $5.20

= $79,040

Factory Labor = Actual Hour × Standard Rate

= 15,000 × $5.20

= $78,000

5. Work in Process Inventory Dr, $79,040

                To Manufacturing Overhead $79,040

(Being manufacturing overhead is recorded)

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