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The Fox Company Uses a Standard Cost Accounting System and Estimates

Question 126

Essay

The Fox Company uses a standard cost accounting system and estimates production for the year to be 60,000 units. At this volume, the company's variable overhead costs are $0.50 per direct labor hour.
The company's single product has a standard cost of $30.00 per unit. Included in the $30.00 is $13.20 for direct materials (3 yards) and $12.00 of direct labor (2 hours). Production information for the month of March follows:
 Nurnber of units produced 6,000 Materials purchased (18,500yards) $88,800 Materials used in production (yards) 18,500 Variable overhead costs incurred $6,380 Fixed overhead costs incured $20,400 Direct labor cost incurred ($6.50/hour) $75,400\begin{array} { l r } \text { Nurnber of units produced } & 6,000 \\\text { Materials purchased (18,500yards) } & \$ 88,800 \\\text { Materials used in production (yards) } & 18,500 \\\text { Variable overhead costs incurred } & \$ 6,380 \\\text { Fixed overhead costs incured } & \$ 20,400 \\\text { Direct labor cost incurred (\$6.50/hour) } & \$ 75,400\end{array}
Required:
Prepare the journal entries to record the following:
a. Incurring actual overhead.
b. Application of overhead to production.
c. Closing of overhead accounts and recognizing variances.
d. Transferring production to finished goods.

Correct Answer:

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