Vernon Mills,Inc

Essay

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 yards of materials were purchased,all of which were used in production.
Required:
a.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.For direct labor,compute the rate and efficiency variances and prepare a journal entry to record the incurrence of direct labor cost for the period.
c.For variable overhead,compute the rate and efficiency variances.
$\begin{array}{lc}&\text { Standard Cost} &\text {Actual Cost }\\\text { Direct materials } \\\text { Standard : } 4.0 \text { yards at } \$ 5.40 \text { per yard } \ldots . \quad &\$ 21.60 \\\text { Actual: } 4.4 \text { yards at } \$ 5.05 \text { per yard } \ldots \ldots \ldots&&\$22.22\\\text {Direct labor: }\\\text {Standard: 1.6 hours at \( \$ 6.75 \) per hour}\ldots \ldots \ldots&10.80\\\text {Actual: 1.4 hours at \( \$ 7.30 \) per hour}\ldots \ldots \ldots&&10.22\\ \text {Variable overhead:}\\ \text {Standard: 1.6 hours at \( \$ 2.70 \) per hour}\ldots \ldots \ldots&\underline{4.32}\\ \text {Actual: 1.4 hours at \( \$ 3.25 \) per hour}\ldots \ldots \ldots&&\underline{4.55}\\ \text {Total cost per unit}\ldots \ldots \ldots\ldots \ldots \ldots\ldots \ldots \ldots&\underline{\$36.72}&\underline{\$39.99}\end{array}$
$\begin{array}{llcc} \text {Actual costs: 4,800 units at \( \$ 36.99 \) per unit........... } &\$177,552 \\ \text { Standard costs: 4,800 units at \( \$ 36.72 \) per unit...... } &\underline{176,256}\\ \text {Difference in cost.................................................. } &\underline{\$1.296} \text { Unfavorable }\\\end{array}$