In: Accounting
The Assembly Department produced 4,000 units of product during March. Each unit required 1.5 standard direct labor hours. There were 6,400 actual hours used in the Assembly Department during March at an actual rate of $14.5 per hour. The standard direct labor rate is $15.5 per hour.
Assuming direct labor for a month is paid on the fifth day of the following month, journalize the direct labor in the Assembly Department on March 31. For a compound transaction, if an amount box does not require an entry, leave it blank.
March 31 | |||
Date | Journal | Debit | Credit |
March 31 | work in process | $93000 | |
Direct labour time variance | $6200 | ||
To direct labour rate variance | $6400 | ||
To wages payable | $92800 |
Explanation:
Actual production = 4000 units
Standard hours per unit = 1.5 hour
Standard hours for actual production = 4000 × 1.5 = 6000 hours
Actual hours(as given in question) = 6400 hours
Standard rate per hour(as given in question) = $15.5
Actual rate per hour(as given in question) = $14.5
1) Inventory(work in process) is calculated for actual production but taking standard labour hour that should have been used at standard rate that should have been used.
Work in process = actual output × standard hour × standard rate
= 4000 × 1.5 × 15.5
= $93000
2) wages payable = actual hour × actual rate
= 6400 × 14.5
= $92800
3) the difference between 1 and 2 is because of difference in actual time taken and actual rate paid compared to standard time and standard rate
Since actual time taken and actual rate of payment both are different there will be labour time variance and labour rate variance.
3(a) direct labour time variance = (standard hour - actual hour) × standard rate
= (6000-6400)×15.5
= 6200(debit)
3(b) direct labour rate variance = (standard rate - actual rate) × actual hours
= (15.5-14.5)×6400
= 6400(credit)
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