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Chapter 08 Flexible Budgets, Standard Costs, and Variance Analysis
8-1
I. Appendix 8B: General Ledger Entries to Record
Variances (Slide #1 is the title slide)
Learning Objective 8-8: Prepare journal entries to
record standard costs and variances.
A. Glacier Peak Outfitters – revisited
i. Direct materials variances
1. The entry to record the purchase of direct
materials would be as shown.
1. The entry to record the materials quantity
variance would be as shown.
ii. Direct labor variances
1. The journal entry to record the incurrence
of direct labor cost would be as shown.
iii. Cost flows in a standard cost system
1. The entries into the various accounts are
made at standard cost – not actual cost.
2. The differences between actual and standard
costs are entered into special accounts that
accumulate the various standard cost
variances.
3. The standard cost variance accounts are
usually closed out to Cost of Goods Sold at
the end of the period. Unfavorable variances
increase Cost of Goods Sold, and favorable
variances decrease Cost of Goods Sold.
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