Question

Information relating to direct labor for the McGill Company follow:

Actual direct labor hours	5,600
Standard direct labor hours	5,400
Total direct labor per payroll	$53,200
Standard labor rate per hour	$9.00

The entry to record the direct labor cost is: (use a table to make the appropriate journal entry).

Answer 1

Answer

• The entry to record the direct labor cost would include:
  Debit to Work in Process by the amount of standard cost allowed,
  Debit to Unfavourable labor variances
  Credit to favourable labor variance, and
  Credit to “payroll” account by the amount of actual labor cost.
• Working

>Actual rate = $ 53200 / 5600 hrs = $ 9.50

• Hence, complete entry would be:

Accounts title	Debit	Credit
Work in Process Inventory (5400 std hrs x $ 9)	$48,600
Direct Labor rate Variance [($9 - *9.50) x 5600]	$2,800
Direct Labor Efficiency Variance [(5400 - 5600) x $9]	$1,800
Payroll		$53,200