Reference no: EM132004318

Problem - Radford Company uses a standard cost system to record its manufacturing costs in the accounting records. The company manufactures a product that uses the following standards.

Direct materials	6 units at $5.00 per unit
Direct labor	2 labor hours at $10.25 per hour
Variable manufacturing overhead	3 machine hours at $6.50 per hour
Fixed manufacturing overhead	3 machine hours at $8.25 per hour

The fixed manufacturing overhead is based on a normal capacity of 360,000 machine hours per year. The actual results for the current year are provided below.

Direct materials purchases	900,000 units at a total cost of $4,523,000
Direct materials used	690,000 units
Direct labor	210,000 labor hours at a total cost of $2,150,000
Actual machine hours used	320,000
Variable manufacturing overhead	Actual cost of $2,100,000
Fixed manufacturing overhead	Actual cost of $2,625,000

The company produced 110,000 units during the year. The company completed 80% of the total work in process during the year. The company sold 90% of the finished goods on hand at a markup of 25% above standard cost. There were no beginning inventories.

REQUIRED: (1) Calculate the following manufacturing cost variances, showing all supporting computations. Round all calculations to the nearest whole dollar.

(a) Direct materials price variance.

(b) Direct materials quantity variance.

(c) Direct labor rate variance.

(d) Direct labor efficiency variance.

(e) Variable manufacturing overhead spending variance.

(f) Variable manufacturing overhead efficiency variance.

(g) Fixed manufacturing overhead spending variance.

(h) Fixed manufacturing overhead volume variance.

(2) Prepare all the general journal entries, in proper form, that would be required to record the transactions in the standard cost system of the company. Assume that variances are isolated at the earliest possible point in the accounting system. Provide a brief explanation for your entry.