Question

Problem 14-48 Standard Costs in Process Costing; All Variances and Journal Entries [LO 14-3, 14-5]

Dash Company adopted a standard costing system several years ago. The standard costs for the prime costs (i.e., direct materials and direct labor) of its single product are:

Material	(7 kilograms × $6.00 per kilogram)	$	42.00
Labor	(5 hours × $18.80 per hour)		94.00

All materials are added at the beginning of processing. The following data were taken from the company’s records for November:

In-process beginning inventory			None
In-process ending inventory		840	units, 75% complete as to direct labor
Units completed		6,100	units
Budgeted output		6,500	units
Purchases of materials		55,000	kilograms
Total actual direct labor costs	$	540,000
Actual direct labor hours		32,400	hours
Materials usage variance	$	2,100	Unfavorable
Total materials variance	$	780	Unfavorable

Required:

1. Compute for November:

a. The direct labor efficiency variance. Is this variance favorable (F) or unfavorable (U)?

b. The direct labor rate variance. Is this variance favorable (F) or unfavorable (U)?

c. The actual number of kilograms of material used in the production process during the month.

d. The actual price paid per kilogram of material during the month, the company calculates the direct materials price variance at point of purchase.

e. The amount of direct materials cost and direct labor cost transferred to the Finished Goods Inventory account.

f. The total amount of direct materials cost and direct labor cost in the Work-in-Process Inventory account at the end of the month.

2. Prepare journal entries to record all transactions, including the variances in requirement 1.

Answer 1

Page-1 Labour eticiency variance- Compute LAg-Sa) Ysp eicieney Labo variance where Aq Actua Labouf hour S Stanchrd Lakour hour Sa (Standard lakaur hour)- Bulgeted unitar labou rour Per unit 5x 6500 39,500 Sp Standhrd wage Rate labous ei cieny Variance 39400 -38,500) $ 100 X 18.80 . labou variance $1880 b) irect tabour Rate variance- oire-ct lakour Rate variance - (Ap-sp)XA where

Page!-9 Actua huriy wage Pate: Total pirect labour coe Actual irect labpur hous 5H0,000 39,400 E 16.66 Sp standard hourly age pat Aq total oiect la kour hour waked. tabour variance - ( 16.66 x 18-80) 3a,400 Di re ct 10,4,93 .'. ha rect labour Variance material variance caluc late Hoge variance-(A-s ) *SP. material ujage -00 A-6500 X )x6 Aq -2i00 A- Q73,000 -2 100 23/000 - 6 AV metrial e variance: Aq u5,50 ujage

Page-3 d) material Peuce variance- = (AP-SP) X Aq where Ap - actualunit pouce Standard unit paice material uyoae vajiance -$ t00(UF) Total material variance : $180 UF) B0-,100) 13,30 material Paice varaeAP-Sp) X AG 80(AP6J X5,150 0900+ 45,150 Ap 80 20,900 - 45150AP 80 Ap - $5.98

Page- Porime Cofes t rarutered Caluctate total amount the inished god to accout Poimecoje) . (standard mantjacturi cae Unith maniactun' ng TOtal amount manttactur ed to the jinished goody Yn Novemben ( $ ५३ +१+) x6160 -136) 6100 29 600 tanfered goods - 89৭,6०০- ES Caluclat e t stansar cot ending nventay 7otal tabour Materias equi valent units yn ending 650 810 yAventay wip Jauentay Standard c oje Per unit Endingnventay at 61,100 96380 35,280 Standard

Page-5 CYedit Debi't Particluare material nvent 3 30,000 Gx 55,000) 80 Pear chay Poice material variance 328,00 Accounts Payable. 55000 x$5.98) 3,000 waK nPoocegg nuenty 6500 materials inventävj 342,600 55000 3100) (53100 X6)