Question

Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its standard cost information follows:

	Standard Quantity		Standard Price (Rate)			Standard Unit Cost
Direct materials (clay)	1.9	lbs.	$	1.20	per lb.	$	2.28
Direct labor	1.6	hrs.	$	10.00	per hr.		16.00
Variable manufacturing overhead (based on direct labor hours)	1.6	hrs.	$	1.40	per hr.		2.24
Fixed manufacturing overhead ($279,040 ÷ 109,000 units)							2.56

Barley Hopp had the following actual results last year:

Number of units produced and sold		99,500
Number of pounds of clay used		214,050
Cost of clay	$	235,455
Number of labor hours worked		134,200
Direct labor cost	$	1,489,620
Variable overhead cost	$	241,560
Fixed overhead cost	$	295,000

Required:
1 & 2. Prepare the journal entries to record the direct materials, direct labor and related variances for Barley Hopp. Assume the company purchases direct materials as needed and does not maintain any ending inventories. (Do not round your intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

1. Record the entry for direct materials costs and variances.

General Journal	Debit	Credit

Options: No journal entry required, Cash or Accounts Payable, Cost of Goods Sold, Direct Labor Efficiency Vaiance, Direct Labor Rate Variance, Direct Materials Price Variance, Direct Materials Quantity Variance, Fixed Overhead Spending Variance, Fixed Overhead Volume Variance, Raw Materials Inventory, Variable Overhead Efficiency Variance, Variable Overhead Rate Variance.

2. Record the entry for direct labor costs and variance

Options: No journal entry required, Cash or Accounts Payable, Cost of Goods Sold, Direct Labor Efficiency Vaiance, Direct Labor Rate Variance, Direct Materials Price Variance, Direct Materials Quantity Variance, Fixed Overhead Spending Variance, Fixed Overhead Volume Variance, Raw Materials Inventory, Variable Overhead Efficiency Variance, Variable Overhead Rate Variance.

Answer 1

Journal Entries
Particulars				Debit	Credit
Entry for direct materials costs and variances
Raw Materials				$     256,860.00
To Materials Price Varaince					$       21,405.00
To Accounts Payable					$     235,455.00
Cost of Goods sold				$     226,860.00
Materials Quantity Variance				$       30,000.00
To Raw Materials					$     256,860.00
Entry for direct labor costs and variance
Cost of Goods sold				$ 1,592,000.00
Labor Rate Variance				$     147,620.00
To Labor Efficiency Variance					$     250,000.00
To Accounts Payable					$ 1,489,620.00

Workings:

		Standard (1 unit)				Standard (99500 units)				Actual (99500 units)
		Qty/ Hour	Price	Amount		Qty/ Hour	Price	Amount		Qty/ Hour	Price	Amount
Direct Materials		1.9	$      1.20	$      2.28		189050	$      1.20	$    226,860.00		214050	$      1.10	$    235,455.00
Direct Labor		1.6	$   10.00	$   16.00		159200	$   10.00	$ 1,592,000.00		134200	$   11.10	$ 1,489,620.00

Direct Material Price Varaince			=	(Standard Price - Actual Price) x Actual Quantity
			=	($ 1.2 - $ 1.1) x 214050
			=	$   21,405.00	(F)
Direct Material Quan. Variance			=	(Standard Hours - Actual Hours) x Standard Rate
			=	(189050 - 214050) x $ 1.2
			=	$   30,000.00	(U)
Direct Labor Rate Variance			=	(Standard Rate - Actual Rate) x Actual Hours
			=	($ 10 - $ 11.1) x 134200
			=	$ 147,620.00	(U)
Direct Labor Effi. Variance			=	(Standard Hours - Actual Hours) x Standard Rate
			=	(159200 - 134200) x $ 10
			=	$ 250,000.00	(F)