Question

Recording Standards in Accounts

The Assembly Department produced 3,000 units of product during March. Each unit required 1.75 standard direct labor hours. There were 5,600 actual hours used in the Assembly Department during March at an actual rate of $11 per hour. The standard direct labor rate is $12 per hour.

Assuming direct labor for a month is paid on the fifth day of the following month, journalize the direct labor in the Assembly Department on March 31. For a compound transaction, if an amount box does not require an entry, leave it blank.

March 31

Answer 1

• Actual Data

Actual Hours (AH) = 5600
Actual rate (AR) = $11 per hour
Actual cost = 5600 x 11 = $61,600

• Standard data

Standard hours (SH) = 3000 units x 1.75 hours = 5250 hours
Standard rate (SR) = $12 per hour
Standard cost = 5250 x 12 = $63,000

• Labor Rate Variance = (SR – AR) x AH
  = (12 – 11) x 5600
  =$5600 Favourable
• Labor Efficiency variance = (SH – AH) x SR
  = (5250 – 5600) x 12
  =$4200 Unfavourable
• Journal Entry on Mar 31

Accounts	Debit	Credit
Work In Process	$                   63,000.00
Labor Efficiency variance	$                     4,200.00
Labor rate Variance		$                    5,600.00
Wages payable		$                  61,600.00