Question

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Direct Labor and Direct Materials Variances, Journal Entries Jameson Company produces paper towels. The company has...

Direct Labor and Direct Materials Variances, Journal Entries

Jameson Company produces paper towels. The company has established the following direct materials and direct labor standards for one case of paper towels:

Paper pulp (3 lbs. @ $0.40) $ 1.20
Labor (2 hrs. @ $12) 24.00
    Total prime cost $25.20

During the first quarter of the year, Jameson produced 50,000 cases of paper towels. The company purchased and used 150,700 pounds of paper pulp at $0.38 per pound. Actual direct labor used was 101,000 hours at $12.10 per hour.

Required:

Instructions for parts 1 and 2: If a variance is zero, enter "0" and select "Not applicable" from the drop down box.

1. Calculate the direct materials price and usage variances.

Materials Price Variance $ Favorable
Materials Usage Variance $ Unfavorable

2. Calculate the direct labor rate and efficiency variances.

Labor Rate Variance $ Unfavorable
Labor Efficiency Variance $ Unfavorable

Feedback

1. MPV (Materials price variance) = (AP – SP) x AQ
MUV (Materials usage variance) = (AQ – SQ) x SP

2. LRV (Labor rate variance) = (AR – SR) x AH
LEV (Labor efficiency variance) = (AH – SH) x SR

3. Prepare the journal entries for (1) the direct materials price variance, (2) the direct materials usage variance, and (3) the direct labor variances. If an amount box does not require an entry, leave it blank or enter "0".

1. Materials
Direct Materials Price Variance
Accounts Payable
2. Work in Process
Direct Materials Usage Variance
Materials
3. Work in Process
Direct Labor Efficiency Variance
Direct Labor Rate Variance
Wages Payable

Solutions

Expert Solution

1. MPV (Materials price variance) = (AP – SP) x AQ

= (0.38-0.40)*150700

Material price variance = 3014 Favorable

MUV (Materials usage variance) = (AQ – SQ) x SP

= (150700-150000)*0.40

Material usage variance = 280 Unfavorable

2. LRV (Labor rate variance) = (AR – SR) x AH

= (12.10-12)*101000

Labour rate variance = 10100 Unfavorable

LEV (Labor efficiency variance) = (AH – SH) x SR

= (101000-100000)*12

labour efficiency variance = 12000 Unfavorable

3. Prepare the journal entries for (1) the direct materials price variance, (2) the direct materials usage variance, and (3) the direct labor variances. If an amount box does not require an entry, leave it blank or enter "0".

No account and explanation debit credit
1 Material (150700*.40) 60280
Direct Materials Price Variance 3014
Account payable (150700*.38) 57266
2 Work in Process (150000*.40) 60000
Direct Materials Usage Variance
280
Materials 60280
3 Work in Process 1200000
Direct Labor Efficiency Variance 10100
Direct Labor Rate Variance 12000
Wages Payable 1222100

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