James has the following information pertaining to its usage of direct labor in a
ID: 2578055 • Letter: J
Question
James has the following information pertaining to its usage of direct labor in a recent period: Total direct labor hours worked (AQ) 30,000 Total units manufactured 8,000 Actual wage rate per hour (AP) $16 Standard cost data: Wage rate per hour (SP) $18 Standard hours per unit 4
Required: 1. Calculate the labor efficiency variance for the period. 2. Calculate the labor rate variance for the period. Prepare journal entry to WIP Inventory to record wages expenses for the period including standard cost variances
Explanation / Answer
1. Labour efficiency variance = (Standard hour-actual hours)standard rate
= (8000*4-30000)18
Labour efficiency variance = 36000 F
2) Labour rate variance = (Standard rate-actual rate)actual hours
= (18-16)30000
Labour rate variance = 60000 F
3) Journal entry :
Date accounts & explanation debit credit Work in process 576000 Labour efficiency variance 36000 Labour rate variance 60000 Wages payable 480000 (To record wages expenses)Related Questions
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