Question

Apple Valley Orchards, Inc. (AVO) make apple products. A certain apple pie requires the following:

      Direct materials standard                          1.5 pounds at $7.25 per pound

      Direct labor standard                                0.25 hours at $14.00 per hour

During September, AVO purchased 1,875 pounds of direct materials costing $13,125 and used 1,825 pounds of direct materials to produce and sell 1,200 pies. Direct labor totaled 280 direct labor hours for $3,990.

Required:

a.   Compute the direct materials variances for September.

b.   Compute the direct manufacturing labor variances for September.

c. Prepare all associated journal entries.

Answer 1

a)	Direct materials price variance
	(Standard price-Actual price)*Actual quantity used
		=	(7.25-7)*1875
		=	468.75	F
	Actual price	=	13125/1875	=	7	Per Pound
b)	Direct materials Quantity variance
	(Standard quantity-Actual quantity)*Standard Price
		=	(1.5*1200-1875)*7.25
		=	-543.75	U
c)	Direct labour efficiency variance
	(Actual Hours-Standard Hours)*Standard rate
		=	(280-1200*0.25)*14
		=	-280	F
d)	Direct labour rate variance
	(Actual rate-Standard rate)*Actual Hour
		=	(14.25-14)*280
		=	70	U
	Actual rate	=	Labour Cost/Labour Hours
		=	3990/280
		=	14.25

Account Name	Debit	Credit
Materials(7.25*1875)	13593.75
Materials price Variance (1875*.25)		468.75
Accounts Payable (7*1875)		13125
Work in process (1.5*1200*7.25)	13050
Material quantity Variance (75*7.25)	543.75
Materials (1875*7.25)		13593.75
Work in process (300*14)	4200
Labor rate variance (.25*280)	70
Labor efficiency variance (20*14)		280
Wages Payable (280*14.25)		3990