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Direct Materials and Labor Variances

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1.) For direct materials:
a.) Compute the direct materials price and quantity of variances.
b.) Prepare journal entries to record the purchase of materials and the use of materials
in production.

2.) For direct labor:
a.) Compute the direct labor rate and efficiency variances.
b.) Prepare a journal entry to record the incurrence of direct labor cost for the month.

3.) Post the entries you have prepared to the following T-accounts. (on excel spreadsheet/other document)

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Solution Preview

Products, Inc., began production of a new product on April 1. The company uses a standard cost system and has established the following standards for one unit of the new product:

Standard Quantity of Hours Standard Price or Rate Standard Cost
Direct Materials 3.5 feet $6 per foot $21.00
Direct Labor 0.4 hours $10 per hour $4.00

During April, the following activity was recorded regarding the new product:

a.) Purchasing acquired 7,000 feet of material at a cost of $5.75 per foot.
b.) Production used 6,000 feet of material to produce 1,500 units of the new product.
c.) Production reported that 725 direct labor-hours were worked on the new product at a cost of $8,120.


1.) For direct ...

Solution Summary

The solution explains how to calculate the direct material and labor variances and pass the related journal entries.