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Chapter 23: Q13SE (page 1309)

The following direct labor variance analysis was performed for Morris.

AC 脳 AQ \(19,800 SC 脳 SQ \)14.00 per DLHr 脳 1,350 DLHr \(18,900 SC 脳 AQ \)14.00 per DLHr 脳 1,800 DLHr \(11.00 per DLHr 脳 1,800 DLHr \)25,200 Efficiency Variance Cost Variance \(5,400 F \)6,300 U

Requirements

1. Record Morris鈥檚 direct labor journal entry (use Wages Payable).

2. Explain what management will do with this variance information.

Short Answer

Expert verified

(1) The journal entry is recorded by debiting work-in-progress by $18,900, direct labor efficiency variance by $6,300 and crediting direct labor cost variance by $5,400 and wages payable by $19,800.

(2) The management should investigate the variances.

Step by step solution

01

Journal Entry

Journal Entry

Date

Accounts and Explanation

Debit ($)

Credit ($)

Work-in-Process Inventory

18,900

Direct Labor Efficiency variance

6,300

Direct Labor Cost Variance

5,400

Wages Payable

19,800

(Direct Labor costs Incurred)

02

Usage of this variance Information by the Management

The management will now get the information that the variance has occurred but this information is not enough for the management of the company. The management should have knowledge of the reasons behind the occurrence of variances. Each of the variances will be investigated by the management and taking corrective measures to correct them.

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Most popular questions from this chapter

Question:List the direct labor variances, and briefly describe each.

Computing and journalizing standard cost variances

Middleton manufactures coffee mugs that it sells to other companies for customizing with their own logos. Middleton prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 59,800 coffee mugs per month:

Direct Materials (0.2 lbs. @ \(0.25 per lb.) \) 0.05

Direct Labor (3 minutes @ \(0.14 per minute) 0.42

Manufacturing Overhead:

Variable (3 minutes @ \)0.06 per minute) \( 0.18

Fixed (3 minutes @ \)0.13 per minute) 0.39 0.57

Total Cost per Coffee Mug \( 1.04

Actual cost and production information for July 2018 follows:

a. There were no beginning or ending inventory balances. All expenditures were on account.

b. Actual production and sales were 62,500 coffee mugs.

c. Actual direct materials usage was 11,000 lbs. at an actual cost of \)0.17 per lb.

d. Actual direct labor usage of 197,000 minutes at a cost of \(33,490.

e. Actual overhead cost was \)10,835 variable and \(29,965 fixed.

f. Selling and administrative costs were \)130,000.

Requirements

1. Compute the cost and efficiency variances for direct materials and direct labor.

2. Journalize the purchase and usage of direct materials and the assignment of direct

labor, including the related variances.

3. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances.

4. Journalize the actual manufacturing overhead and the allocated manufacturing overhead. Journalize the movement of all production from Work in Process Inventory. Journalize the adjusting of the Manufacturing Overhead account.

5. Middleton intentionally hired more highly skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise?

Headset manufactures headphone cases. During September 2018, the company produced 106,000 cases and recorded the following cost data:

Standard Cost Information

Quantity

Cost

Direct Materials

2 parts

\( 0.16 per part

Direct Labor

0.02 hours

8.00 per hour

Variable Manufacturing Overhead

0.02 hours

11.00 per hour

Fixed Manufacturing Overhead (\)30,720 for static budget volume of 96,000 units and 1,920 hours, or \(16 per hour)

Actual Information

Direct Materials (209,000 parts @ \)0.21 per part) \( 43,890

Direct Labor(1,620 hours @ \)8.10 per hour) 13,122

Variable Manufacturing Overhead 9,000

Fixed Manufacturing Overhead 30,000

Requirements

1. Compute the cost and efficiency variances for direct materials and direct labor.

2.For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances.

3. Headset鈥檚 management used better颅quality materials during September. Discuss the trade颅off between the two direct material variances.

Briefly describe how journal entries differ in a standard cost system.

List the eight product variances and the manager most likely responsible for each.
See all solutions

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