CP23-35 Calculating materials and labor variances and preparing journal entries
ID: 2414956 • Letter: C
Question
CP23-35 Calculating materials and labor variances and preparing journal entries
Assume Daniels has created a standard cost card for each job. Standard direct materials sper job include 10 software packages at a cost of $900 per package. Standard direct labor costs per job include 105 hours at $100 per hour. Daniels plans on completing 12 jobs during March 2018.
Annual direct materials costs for March included 90 software packaes at a total cost of $81,450. Actual direct labor costs included 110 hours per job at an average rate of $107 per hour. Daniels completed all 12 jobs in March.
Requirements:
1. Calculate direct materials cost and efficiency variances
2. Calculate direct labor cost and efficiency variances
3. Prepare journal entries to record the use of both materials and labor for March for the company
Please give the step-by-step processing when determining the answers. Thank you!
Explanation / Answer
Material Quantity variance = ( Std Quantity - Actual Quantity) * Std Price
= (10*12 - 90) * 900 = 27000 Favourable
Material Price Variance = ( Std Price * Actual quantity - Actual Price paid)
= (900*90 - 81450) = 450 Adverse
Total material variance = 27000 - 450 = 26550 Favourable
Labour efficiency variance = (Std Hours - Actual Hours) * std rate
= ( 105 * 12 - 110 * 12) * 100 = 6000 Adverse
Labour rate variance = (Std rate - Actual Rate) * Actual Hours
= ( 100 - 107) * 110 * 12 = 9240 Adverse
Total labour variance = 6000 + 9240 = 15240 Adverse
Journal Entries
Direct Material A/c Dr 81000
Material Price Variance A/c Dr 450
To Accounts Payable 81450
Work In Process A/c Dr 108000
To Material QuantityVariance A/c 27000
To Direct Materials 81000
Work In Process A/c Dr 126000
Labour Rate Variance a/c Dr 9240
Labour Efficiency Variance a/c Dr 6000
To Wages Payable 141240