Question

Jameson Company produces paper towels. The company has established the following direct materials and direct labor standards for one case of paper towels:

Paper pulp (3 lbs. @ $0.40)	$ 1.20
Labor (2 hrs. @ $12)	24.00
Total prime cost	$25.20

During the first quarter of the year, Jameson produced 45,000 cases of paper towels. The company purchased and used 135,700 pounds of paper pulp at $0.37 per pound. Actual direct labor used was 91,000 hours at $12.20 per hour.

Required:

Instructions for parts 1 and 2: If a variance is zero, enter "0" and select "Not applicable" from the drop down box.

1. Calculate the direct materials price and usage variances.

Materials Price Variance	$
Materials Usage Variance	$

2. Calculate the direct labor rate and efficiency variances.

Labor Rate Variance	$
Labor Efficiency Variance	$

3. Prepare the journal entries for (1) the direct materials price variance, (2) the direct materials usage variance, and (3) the direct labor variances. If an amount box does not require an entry, leave it blank or enter "0".

1.
2.
3.

Answer 1

Actual hours Actual hours Labour rate variance 91,000 Standard rate $ 91,000 Actual rate $ 12.00 12.20 $ 1,092,000 $ 1,110,200 $ (18,200) Unfavourable A (Actual hours * Standard rate) B (Actual hours * Actual rate) (A-B) Standard Hours Actual hours Labour Efficency variance 90,000 Standard rate $ 91,000 Standard rate $ 12.00 12.20 $ 1,080,000 (90,000*$ 12.00) $ 1,110,200 (91,000*$ 12.20) S (30,200) Unfavourable A B (A-B) Standard Hours (Actual production*Standard hour per unit) (Actual production ( 45,000 )cases * 2 (45,000* 2 hour) 90,000 Standard Quantity Actual Quantity of material used 135000 (45000*3) 135700 Material price variance (Standard price* Actual Quantity)-(Actual price* Actual Quantity) (0.40* 135,700)-(0.37*135000) $ 4,330 Favourable Material quantity variance (Standard quantity* Standard Price)-(Actual Quantity used* Standard Price) (135000*0.40)-(135700*0.40) $ (280) Unfavourable

Credit Debit $ 54,280 (Actual Quantity used* Standard Price) General journal Raw materials inventory Material price variance Accounts payable To record Material price variance ariance $ $ 4,330 49,950 (Standard quantity* Standard Price) 54,000 280 Work in progress-Inventory | $ Material quantity variance $ Raw materials inventory To record Material quantity variance $ 54.280 (Standard hours * Standard rate) Work in progress-Inventory Labour rate variance Labour Efficency variance Wages payable To record Labour variance $ 1,080,000 $ 18,200 $ 30.200 $ 1,128,400