Boron Chemical Company

Exercise 13-56 (Appendix): Journal Entries in a Standard Cost System

Boron Chemical Company produces a synthetic resin that is used in the automotive industry. The company uses a standard cost system. 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.)