Question

Recording Standards in Accounts The Assembly Department produced 4,000 units of product during March. Each unit required 1.75 standard direct labor hours. There were 7,500 actual hours used in the Assembly Department during March at an actual rate of $14.5 per hour. The standard direct labor rate is $15.5 per hour. Assuming direct labor for a month is paid on the fifth day of the following month, journalize the direct labor in the Assembly Department on March 31. For a compound transaction, if an amount box does not require an entry, leave it blank. March 31

Answer 1

Ans:

JOURNAL ENTRY :

DATE	ACCOUNT & EXPLANATION	DEBIT	CREDIT
	WORK IN PROCESS A/C (4,000 units*1.75 hours*$15.5)	108,500
	LABOR EFFICIENCY VARIANCE A/C	7,750
	LABOR RATE VARIANCE A/C		7,500
	WAGES PAYABLE A/C (7,500 hours*$14.5)		108,750
	(ENTRY TO RECORD LABOR VARIANCES )

Working:

1) Direct Labor Efficiency Variance= Standard Rate*(Standard Hours-Actual Hours)

$15.5(7,000-7,500) =$7,750 unfavorable

Note:

Standard labor hours=Actual production*standard hours required per unit

4,000 units*1.75 hours=7,000 hours

2) Direct Labor Rate Variance=Actual Hours*(Standard Rate-Actual Rate)

7,500 hours*($15.5-$14.5) =$7,500 favorable