Question

Direct Materials and Direct Labor Variances

Zoller Company produces a dark chocolate candy bar. Recently, the company adopted the following standards for one bar of the candy:

Direct materials (6.30 oz. @ $0.20)	$1.26
Direct labor (0.08 hr. @ $18.00)	1.44
Standard prime cost	$2.70

During the first week of operation, the company experienced the following actual results:

1. Bars produced: 141,000.
2. Ounces of direct materials purchased: 888,600 ounces at $0.21 per ounce.
3. There are no beginning or ending inventories of direct materials.
4. Direct labor: 11,140 hours at $17.20.

Required:

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

1. Compute price and usage variances for direct materials.

Materials Price Variance	$
Materials Usage Variance	$

2. Compute the rate variance and the efficiency variance for direct labor.

Labor Rate Variance	$
Labor Efficiency Variance	$

3. Prepare the journal entries associated with direct materials and direct labor. If an amount box does not require an entry, leave it blank or enter "0".

	Record purchase of materials
	Record usage of materials
	Record labor variances

Answer 1

Calculations are shown below: Materials price variance 11 (Standard price Actual price) x Actual 2-0.21) 888600 Materials quantity variance Standard x Standard price 141000 6.3)-888600) 0.2 Labor rate variance | (Standard rate-Actual rate) × Actual hours Labor efficiency variance Standard hours Actual hours) x Standard rate 4 2 18-17.2) 11140 (141000*0.08)-11140) 18 Account Titles and Explanation Debit Credit Materials invent -888600*0.2 --C1 10 Materials price variance -888600 0.21 Accounts o record purchases of materials 12 13 Work in process inv -141000*6.3*0.2 15 16 17 18 19 20 21 888600*0.2 To record of materials Work in process -141000 0.08 18 Labor rate variance Labor -C5 -11140 17.2 vanance 23 To record labor variances)