(Appendix 10B)Vernon Mills,Inc

question 213

Essay

(Appendix 10B)Vernon Mills,Inc.is a large producer of men's and women's clothing.The company uses standard costs for all of its products.The standard costs and actual costs per unit of product for a recent period are given below for one of the company's product lines:
During this period,the company produced 4,800 units of this product.A comparison of standard and actual costs for the period on a total cost basis is given below:
There was no inventory of materials on hand at the beginning of the period.During the period,21,120 metres of materials were purchased,all of which were used in production.
Required:
a)(Appendix 10B)For direct materials,compute the price and quantity variances for the period and prepare journal entries to record all activity relating to direct materials for the period.
b)(Appendix 10B)For direct labour,compute the rate and efficiency variances and prepare a journal entry to record the incurrence of direct labour cost for the period.
c)For variable overhead,compute the spending and efficiency variances.

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Definitions:

Cost

An amount that must be paid or spent to buy or obtain something, reflecting the expense associated with acquiring or maintaining an asset.

Compounded Annual Rate

The Compounded Annual Growth Rate (CAGR) measures the annual growth rate of an investment over a specified time period, taking into account the effect of compounding.

Savings Account

A bank account that earns interest over time, allowing individuals to save money for future use.

Deposits

Funds placed into an account in a bank or financial institution for safekeeping or to earn interest.