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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.