Boron Chemical Company produces a synthetic resin

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Description

Exercise 13-56 (Appendix): Journal Entries in a Standard Cost System
Background – Boron Chemical Company produces a synthetic resin that is used in the automotive industry. The company uses a standard cost sysem. For each gallon of output, the following direct manufacturing costs are anticipated.

Problem Information

Output standards:
Hours Wage Rate Total/Unit
Direct labor 2 $25.00 $50.00

Gals. Cost/Gal. Total/Unit
DM 2 $10.00 $20.00

Actual Results, December 2007:
Gallons of output produced 2,500
DLHs worked 4,900
Actual wage rate (average) $19.50
DM purchases (gallons) 6,000
Act. DM cost/gallon purchased $10.45
Gals. Issued to production 5,100
Units (gallons) sold 2,000
Selling price per unit (gal.) $150.00

The company’s practice is to record the price variance for materials at point of purchased.

13-56 Requirements

Give journal entries for the following events and transactions:
1. Purchase, on credit, of direct materials.
2. Direct materials issued to production.
3. Direct labor cost of units completed this period
4. Direct manufacturing cost (direct labor plus direct materials) of units completed and transferred to
Finished Goods Inventory.
5. Sale, for $150 per gallon, of 2,000 gallons of output. (Hint: you will need two journal entries here.)

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