Question

E7-29 (similar to) The Madison Corporation manufactures lamps. It has set up the following standards per finished unit for direct materials and direct manufacturing labor (Click the icon to view the standards.) The number of finished units budgeted for January 2017 was 9,760; 9,600 units were actually produced. (Click the icon to view actual data.) Requirement 1. Compute the January 2017 price and efficiency variances of direct materials and direct manufacturing lal Let's begin by calculating the actual input at the budgeted price. (Round your answers to the nearest whole dollar.) Actual input X Budgeted price = Cost Direct materials (purchases) Direct materials (usage) Direct manufacturing labor

Answer 1

Solutions:

2.

Journal Entries
Raw Materials	517280
Direct Materials Purchase Price Variance	14640
Accounts Payable		531920
( To record direct Price material Variance)
Work -in- Process	508800
Direct Material Efficiency Variance		2650
Raw Materials		506150
(To record Material Efficiency Variance)
Work-in-Process	148800
Direct Labor rate Variance	6900
Direct Labor Efficiency Variance		6200
Wages Payable		149500
(To record direct manufacturing labor )

3. The unfavorable Material price and Labor rate variances may relate to better quality of raw materials/ labor or price fluctuation between the budget period and the actual purchase. The favorable efficiency variance of both labor and material may be again attributable to the quality of material and labor.

4. The purchasing point is where responsibility for price variances is found most often. The production point is where responsibility for efficiency variances is found most often. Madison Corporation may calculate variances at different points in time to tie in with these different responsibility areas