Howard Company has established the following standards: Direct materials: 2.0 pounds at $4.80 Direct labor: 1.3...

Howard Company has established the following standards:

Direct materials: 2.0 pounds at $4.80
Direct labor: 1.3 hours at $10 per hour
Additional information was extracted from the accounting records:
Actual production: 20,000 completed units
Direct materials purchased: 47,000 pounds at $4.40, or $206,800
Direct materials consumed: 41,000 pounds
Actual labor incurred: 25,000 hours at $9.4, or $235,000
Direct-labor rate variance: $53,000 favorable
Direct-labor efficiency variance: $28,000 unfavorable
Assume that the company computes variances at the earliest point in time.

Required:
a. What is the amount of Direct Material Purchase Price Variance?
b. Prepare the journal entry to record the usage of direct materials.
c. Prepare the journal entry to record the incurrence of direct labor costs.

Expert Solution

Req a.
Material purchase price variance = Actual Qty purchased (Std price -Actual price)
			47000 (4.80-4.40) = 18800 Fav


Req b.
Material Quantity variance = Std price (Std qty-Actual qty used)
			4.80 (40000-41000) = 4800 Unfav

Journal entries
S.no.	Accounts title and explanations		Debit $	Credit $
b.	Work in process (40000*4.80)		192000
	Material Quantity variance		4800
	Raw material inventory			196800
	(for material used)

Req c.
Journal entries
S.no.	Accounts title and explanations		Debit $	Credit $
c.	work in process inventory (26000*10)	260000
	Labour efficiency variance		28000
	Labour rate variance			53000
	Factory Wages payable			235000
	(for labour cost incurred)

ekkarill92 answered 1 year ago

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