Exercise 9.20 Direct Labor and Direct Materials Variances, Journal Entries James

Question

Exercise 9.20

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:

During the first quarter of the year, Jameson produced 45,000 cases of paper towels. The company purchased and used 135,700 pounds of paper pulp at $0.38 per pound. Actual direct labor used was 91,000 hours at $12.10 per hour.

Required:

1. Calculate the direct materials price and usage variances.

2. Calculate the direct labor rate and efficiency variances.

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1. MPV (Materials price variance) = (AP – SP) x AQ

MUV (Materials usage variance) = (AQ – SQ) x SP

2. LRV (Labor rate variance) = (AR – SR) x AH

LEV (Labor efficiency variance) = (AH – SH) x SR

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.

  

  

  

  

  

  

  

  

  

  

  

  

Materials Price Variance $ - Select your answer -FavorableUnfavorableCorrect 2 of Item 1 Materials Usage Variance $ - Select your answer -FavorableUnfavorableCorrect 4 of Item 1

Explanation / Answer

1. MPV (Materials price variance) = (SP – AP) x AQ

= (0.38 - 0.40) x 135700

= 2714 A

MUV (Materials usage variance) = (SQ – AQ) x SP

= (135000 - 135700) x 0.38

= 266 A

2. LRV (Labor rate variance) = (SR – AR) x AH

= (12 - 12.10) x 91000

= 9100 A

LEV (Labor efficiency variance) = (SH – SAH) x SR

= (90000 - 91000) x 12

= 12000 A

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