Question

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 $0.37 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	$fill in the blank 5299e2f81038fdc_1
Materials Usage Variance	$fill in the blank 5299e2f81038fdc_3

2. Calculate the direct labor rate and efficiency variances.

Labor Rate Variance	$fill in the blank 5299e2f81038fdc_5
Labor Efficiency Variance	$fill in the blank 5299e2f81038fdc_7

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.		fill in the blank a14370fd1faffb5_2	fill in the blank a14370fd1faffb5_3
		fill in the blank a14370fd1faffb5_5	fill in the blank a14370fd1faffb5_6
		fill in the blank a14370fd1faffb5_8	fill in the blank a14370fd1faffb5_9
2.		fill in the blank a14370fd1faffb5_11	fill in the blank a14370fd1faffb5_12
		fill in the blank a14370fd1faffb5_14	fill in the blank a14370fd1faffb5_15
		fill in the blank a14370fd1faffb5_17	fill in the blank a14370fd1faffb5_18
3.		fill in the blank a14370fd1faffb5_20	fill in the blank a14370fd1faffb5_21
		fill in the blank a14370fd1faffb5_23	fill in the blank a14370fd1faffb5_24
		fill in the blank a14370fd1faffb5_26	fill in the blank a14370fd1faffb5_27
		fill in the blank a14370fd1faffb5_29	fill in the blank a14370fd1faffb5_30

Answer 1

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Jameson
Answer 1
Direct Material	Amount	Remarks	Note
Standard material required per unit	3.00		A
Standard material rate per yard	0.40		B
Units manufactured	50,000.00		C
Standard material cost	60,000.00		D=A*B*C
Standard cost of Actual Quantity used
Actual Quantity used	150,700.00		E
Standard material rate per yard	0.40		See B
Standard cost of Actual Quantity used	60,280.00		F=B*E
Actual Quantity used	150,700.00
Actual rate	0.37
Actual cost	55,759.00		I
Usage Variance	280.00	Unfavorable	J=F-D
Price Variance	(4,521.00)	Favorable	K=I-H
Total Variance	(4,241.00)	Favorable	L=J+K
Answer 2
Labor
Standard labor required per unit	2.00		M
Standard rate per hour	12.00		N
Units manufactured	50,000.00		See C
Standard labor cost	1,200,000.00		O=M*N*C
Standard cost of Actual hours
Actual hours	101,000.00		P
Standard labor rate per hour	12.00		See N
Standard cost of Actual labor used	1,212,000.00		Q=P*N
Actual hours	101,000.00
Actual labor rate per hour	12.10
Actual cost	1,222,100.00		R
Efficiency Variance	12,000.00	Unfavorable	S=Q-O
Rate Variance	10,100.00	Unfavorable	T=R-Q
Total Variance	22,100.00	Unfavorable	U=S+T
Account	Debit $	Credit $
Answer 3-1
Cost of goods sold	4,521.00
Material Price Variance		22,100.00
Answer 3-2
Material Usage Variance	280.00
Cost of goods sold		280.00
Answer 3-3
Cost of goods sold	22,100.00
Labor Variance		22,100.00