Fairfield Co

question 81

Essay

Fairfield Co. collected the following information about its production activities for the current year.
a. Compute the direct materials price and quantity variances and indicate whether each is favorable or unfavorable.
b. Prepare the journal entry to record the issuance of direct materials into production.
Actual costs and quantities:
Direct materials used 95,000 lbs. @ $6.30 per lb.
Units completed during the year, 50,000 units
Standard costs and quantities:
Price per lb. of direct material, $6.05
Two lbs. of direct material per unit

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Definitions:

Period Cost

Costs that are not directly tied to the production of goods and are expensed in the period they are incurred.

Financial Accounting

The practice of recording, summarizing, and reporting the myriad of transactions resulting from business operations over a period of time.

Managerial Accounting

The practice of analyzing, presenting, and interpreting financial data to help managers make informed business decisions.

Economic Events

Transactions and occurrences that affect the financial position of a business, including sales, purchases, and investments.