Question

Assume Duggar Consulting has created a standard cost card for each job. Standard direct materials per job include 13 software packages at a cost of $900 per package. Standard direct labor costs per job include 85 hours at $100 per hour. Duggar plans on completing 10 jobs during March 2018. Actual direct materials costs for March included 90 software packages at a total cost of $81,450. Actual direct labor costs included 95 hours per job at an average rate of $107 per hour. Duggar completed all 10 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.

Answer 1

Material cost:
Std qty: 13 units
Std price: 900 pr unit\
Actual output: 10 Jobs
Std qty allowed (10*13): 130
Actual qty: 90 units
Actual Material cost: 81450
Actual price (81450/ 90): 905
Material cost Variance = Std price*Std qty -Actual Qty *Actua price
		900*130 - 90*905 = 35550 Fav
Material Efficiency variance: Std price (Std Qty-Actual Qty)
		900 (130-90) = 36000 Fav
Labour cost:
Std hour allowed: (85*10): 850 hours
Std rate: 100 per hour
Actual hours: 950 hours
Actual rate: 107 per hour
Labour cost variance = Std rate*Std hours - Actual rate*Actual hours
		100*850 - 950 *107 = 16650 Unfav
Labour efficiency variance: Std rate (Std hours-actual hours)
		100 (850-950) = 10000 Unfav
Journal entries:
Accounts title and explanations				Debit $	Credit $
Work in process Inventory Dr.			(900*130)	117000
Raw material inventory (90*900)					81000
Material efficiency variance					36000
Workin process inventory Dr. (850*100)				85000
Labour efficiency variance Dr.				10000
Factory wages (950*100					95000