Question

Assume Daisy Consulting has created a standard cost card for each job. Standard direct materials per job include 11 software packages at a cost of $ 950 per package. Standard direct labor costs per job include 85 hours at $ 150 per hour. Daisy plans on completing 11 jobs during March 2018. Actual direct materials costs for March included 85 software packages at a total cost of $ 82,875.

Actual direct labor costs included 95 hours per job at an average rate of $ 160 per hour. Daisy completed all 11 jobs in March.

Calculate direct materials cost and efficiency variances.

Calculate direct labor cost and efficiency variances

Prepare journal entries to record the use of both materials and labor for March for the company.

Answer 1

Part 1

Direct materials cost variance = AQ * (AP-SP) = 85*((82875/85)-950) = 85*(975-950) = 2125 Unfavorable

Direct materials cost efficiency variance = SP * (AQ-SQ) = 950* (85-(11*11)) = 950*(85-121) = - 34200 = 34200 Favorable

Part 2

Direct labor cost variance = AH * (AR - SR) =(95*11) * (160-150) = 10450 Unfavorable

Direct labor cost efficiency variance = SR * ((95*11)-(85*11)) = 150 * (95 - 85) = 16500 Unfavorable

Part 3

Date	account titles and explanation	debit	credit
31 March	raw materials inventory (950*85)	80750
	Direct materials cost variance		2125
	Accounts Payable		78625
	Purchased direct materials
31 March	work in progress inventory (950*121)	114950
	Direct materials efficiency variance	34200
	Raw materials inventory		149150
	Used raw materials
31 March	work in progress inventory (85*11*150) Direct labor cost variance Direct labor efficiency variance	140250 10450 16500
	Wages payable (95*11*160) Used direct labor		167200