Reference no: EM132702484

Question - Slick Corporation is a small producer of synthetic motor oil. During May, the company produced 5,000 cases of lubricant. Each case contains 12 quarts of synthetic oil. To achieve this level of production, Slick purchased and used 16,500 gallons of direct materials at a cost of $21,079. It also incurred average direct labor costs of $15 per hour for the 4,077 hours worked in May by its production personnel. Manufacturing overhead for the month totaled $9,893, of which $2,200 was considered fixed. Slick's standard cost information for each case of synthetic motor oil is as follows.

Direct material standard price $1.30 per gallon, Standard quantity allowed per case 3.25 gallons, Direct labor standard rated $16 per hour, Standard hours allowed per case 0.75 direct labor hours, fixed overhead budgeted $2,600 per month, Normal level of production 5,200 cases per month, Variable overhead application rate $1.50 per case, Fixed overhead application rate ($2,600 /5,200 cases) 0.50 per case, Total overhead application rate $ 2.00 per case.

Required -

1. Compute the manufacturing overhead spending and volume variances.

2. Prepare the journal entries to:

i. Transfer the cost of the 5000 cases if synthetic motor oil produced in May to Finished Goods.

ii. Close any over-or underapplied overhead to cost of goods sold.