Tough Hardware Purchases Raw Materials and Processes Those Purchases Through

question 108

Essay

Tough Hardware purchases raw materials and processes those purchases through a receiving / inspection process prior to stocking for production.Tough places 3 purchase orders for materials for production and receives the goods that day.The first PO is for 2,500 1 / 2" × 96" milling blanks at $2.75 each.The second is for 4,000 pieces of 48" × 96" × 1" sheet steel at $15.55 each.The third PO is for five 5 gallon drums of milling lubrication oil at $475.00 per barrel.
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​The receiving / inspection process is completed and the goods are transferred from Receiving Inventory to Raw Materials.The Receiving / Inspection Department assigns manufacturing overhead of $55.00 per purchase order as well as $2.75 per piece on metal goods and $35.00 per container on fluids.All labor is allocated through overhead.
​(a)Write the journal entry to purchase and receive these items to Receiving Inventory on account.
​(b)Assign overhead to the metal goods.
​(c)Assign overhead to the fluid goods.
​(d)Transfer all goods to Raw Materials Inventory.

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Definitions:

Unfavorable Cost Variance

A variance that occurs when the actual cost exceeds the standard cost.

Favorable Cost Variance

A variance that occurs when the actual cost is less than standard cost.

Standard Cost

A predetermined cost of manufacturing, storing, and marketing a product, used for budgeting and performance evaluation.

Variances

Differences between planned or expected financial performances to the actual financial performance.