Loretto Company’s standard cost accounting system recorded this information from its December operations.
|
Standard direct materials cost |
$130,000 |
|
Direct materials quantity variance (unfavorable) |
5,000 |
|
Direct materials price variance (favorable) |
1,500 |
|
Actual direct labor cost |
65,000 |
|
Direct labor efficiency variance (favorable) |
7,000 |
|
Direct labor rate variance (unfavorable) |
500 |
|
Actual overhead cost |
250,000 |
|
Volume variance (unfavorable) |
12,000 |
|
Controllable variance (unfavorable) |
8,000 |
Required
1. Prepare December 31 journal entries to record the company’s costs and variances for the month. (Do not prepare the journal entry to close the variances.)
2. Identify the areas that would attract the attention of a manager who uses management by exception. Explain what action(s) the manager should consider.