Reference no: EM132567109

Question - YZ Company Ltd. manufactures leather. Management has recently established a standard cost system in order to control costs and, to set the selling price of its leather at 120 percent of standard cost.

The standard cost per unit based on a monthly production of 1,500 units is as follows:

Raw materials, 10 parts per unit @ $1.10 per part

Direct labour, 3 hours per unit @ $4.50 per hour

Manufacturing overhead:

Variable: $1.30 per direct labour hour

Fixed: $3.10 per direct labour hour

During the month of February, 1,200 units were put into production and completed. The company accountant has gathered the following additional information concerning production:

1. Raw material purchases: 20,000 parts for a total cost of $21,200

2. Raw materials: 16,000 parts used

3. Direct labour: cost for the month - $18,000

4. Actual direct labour hours: 3,000 hours

5. Manufacturing overhead incurred for the month: Variable $4,800 Fixed: $12,000

Required -

1. Determine the unit-selling price.

2. Determine the variances resulting from production for the month of February for direct materials, direct labour, variable overhead and fixed overhead.

3. Do journal entries to:

4. Record the incurrence of fixed manufacturing overhead.

5. Record the allocation of fixed manufacturing overhead.

6. Close the accounts and record the variances.