Journal Entries to Record Variances Appendix 10 B

Journal Entries to Record Variances Appendix 10 B Power. Point Authors: Susan Coomer Galbreath, Ph. D. , CPA Charles W. Caldwell, D. B. A. , CMA Jon A. Booker, Ph. D. , CPA, CIA Cynthia J. Rooney, Ph. D. , CPA Copyright © 2015 by Mc. Graw-Hill Education. All rights reserved.

10 A-2 Learning Objective 5 (Appendix 10 B) Prepare journal entries to record standard costs and variances.

10 A-3 Glacier Peak Outfitters ― Revisited We will use information from the Glacier Peak Outfitters example presented earlier in the chapter to illustrate journal entries for standard cost variances. Recall the following: Material AQ × AP = $1, 029 AQ × SP = $1, 050 SQ × SP = $1, 000 MPV = $21 F MQV = $50 U Labor AH × AR = $26, 250 AH × SR = $25, 000 SH × SR = $24, 000 LRV = $1, 250 U LEV = $1, 000 U Now, let’s prepare the entries to record the labor and material variances.

10 A-4 Recording Materials Variances

10 A-5 Recording Labor Variances

10 A-6 Cost Flows in a Standard Cost System Inventories are recorded at standard cost. Variances are recorded as follows: w Favorable variances are credits, representing savings in production costs. w Unfavorable variances are debits, representing excess production costs. Standard cost variances are usually closed out to cost of goods sold. w Unfavorable variances increase cost of goods sold. w Favorable variances decrease cost of goods sold.

10 A-7 End of Appendix 10 B