The Morocco Company Uses a Standard Cost Accounting System and Estimates

question 151

Essay

The Morocco Company uses a standard cost accounting system and estimates production for the year to be 60,000 units. At this volume, the company's variable overhead costs are $0.50 per direct labor hour.
The company's single product has a standard cost of $30.00 per unit. Included in the $30.00 is $13.20 for direct materials (3 yards) and $12.00 of direct labor (2 hours). Production information for the month of March follows:
$$\begin{array} { l r } \text { Nurnber of units produced } & 4,500 \\\text { Materials purchased (13,300yards) } & \$ 61,600 \\\text { Materials used in production (yards) } & 13,300 \\\text { Variable overhead costs incurred } & \$ 4,380 \\\text { Fixed overhead costs incured } & \$ 20,400 \\\text { Direct labor cost incurred (\$6.25/hour) } & \$ 75,750\end{array}$$
Required:
Prepare the journal entries to record the following:
a. Purchase and use of direct materials (Assume materials are used as purchased and no inventory is maintained).
b. Recognition of direct labor.
c. Incurring actual overhead.
d. Application of overhead to production.
e. Closing of overhead accounts and recognizing variances.
f. Transferring production to finished goods.

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Definitions:

Real Exchange Rate

The rate at which goods and services of one country can be exchanged for those of another, adjusting for price level differences.

Trade Deficit

The economic condition that occurs when a country imports more goods and services than it exports.

Net Exports

The net amount obtained by subtracting a nation's total imports from its total exports.

Imports

Goods or services brought into one country from another for the purpose of being sold or used, contributing to the domestic supply of products.