Chemical, Inc

question 33

Essay

Chemical, Inc., has set the following standards for direct materials and direct labor for each 20-pound bag of Weed-Be-Doom: The company manufactured 100,000 bags of Weed-Be-Doom in December and used 2,700,000 pounds of XF-2000 and 5,200 direct labor-hours. During the month the company purchased 3,000,000 lbs. of XF-2000 at $0.075 per pound and incurred a total payroll of $182,000 for direct labor. The company records purchases at standard cost and therefore recognizes material price variances at point of purchase.
Required
1. Compute the price and usage variances for direct materials, and the rate and efficiency variances for direct labor.
2. Prepare journal entries to record the preceding events.

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Definitions:

Retained Earnings

Profits that a company has earned to date, less any dividends or other distributions paid to shareholders.

Earnings Per Share

A financial ratio calculated by dividing a company's profit available to its common shareholders by the number of outstanding shares.

Outstanding Common Stock

Shares of a company that have been issued and are currently held by investors, excluding shares held by the company itself.

Income Earned

Revenue recognized from the sale of goods or services, or the performance of operational activities.