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LO24-3, LO24.4 PROBLEM 24.2A Computing and Journalizing Cost Variances AgriChem Industries manufactures fertilizer concentrate and uses cost standards. The fertilizer is produced in 500-pound batches; the normal level of production is 250 batches of fertilizer per month. The standard costs per batch are as follows. Standard Costs per Batch $300 Direct materials: Various chemicals (500 pounds per batch at $0.60/pound) Direct labor: Preparation and blending (25 hours per batch at $7.00/hour) Manufacturing overhead: Fixed ($50,000 per month + 250 batches) Variable (per batch) Total standard cost per batch of fertilizer 175 $200 25 225 $700 During January, the company temporarily reduced the level of production to 200 batches of fertilizer. Actual costs incurred in January were as follows. Direct materials (102,500 pounds at $0.57/pound). Direct labor (4.750 hours at $6.80/hour) Manufacturing overhead Total actual costs (200 batches) Standard cost of 200 batches (200 batches x $700 per batch) Net unfavorable cost variance $ 58,425 32,300 54,525 $ 145,250 140,000 5,250 a. Instructions You have been engaged to explain in detail the elements of the $5,250 net unfavorable cost vari- ance and to record the manufacturing costs for January in the company's standard cost accounting system. As a first step, compute the materials price and quantity variances, the labor rate and effi- ciency variances, and the overhead spending and volume variances for the month. b. Prepare journal entries to record the flow of manufacturing costs through the standard cost system and the related cost variances. Make separate entries to record the costs of direct mate rials used, direct labor, and manufacturing overhead. Work in Process Inventory is to be deb ited only with standard costs

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