Question

Direct Labor and Direct Materials Variances, Journal Entries

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 50,000 cases of paper towels. The company purchased and used 150,700 pounds of paper pulp at $0.38 per pound. Actual direct labor used was 101,000 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

1) DIRECT MATERIAL quantity RATE per unit TOTAL STANDARD 150000 0.40 60,000.00 (50000* 3) ACTUAL 150700 0.38 57,266.00 (SP- AP) *AQ (0.4-0.38)*150700 (SQ- AQ)X SP (150000-150700) *0.4 material price variance material QUANTITY variance 3,014 F 280 U AQ ACTUAL QTY SP STANDARD PRICE 2) DIRECT LABOUR total hours AP ACTUALPRICE SQ STANDARD QTY SR STANDARD RATE rate STANDARD 100000 12.00 1,200,000.00 |(50000* 2) AR ACTUAL RATE SH STANDARD HOURS AH ACTUAL HOURS ACTUAL 101000 12.10 1,222,100.00 LABOUR RATE VARIANCE LABOUREFFICIANCY VARIANCE (SH-AH) X SR (100000-101000) 12 (SR- AR)XAH (12-12.2) 101000 10,100 U 12,000 U Part 3: Account title 1 Materials Direct material price variance accounts payable Debit Credit 60,280 3,014 57,266 2Work in process Direct material usage variance 60,000 280 Materials 60,280 3 Work in process Direct labor efficiency variance Direct labor rate variance 1,200,000 10,100 12,000 Wages payable 1,222,100