Price and efficiency variances, journal entries. Chemical, Inc., has set up the following standards per finished output unit for direct materials and direct manufacturing labour:

Direct materials: 10 kilograms at $3.60 per kilogram $36 Direct manufacturing labour: 0.5 hour at $24 per hour 12 The number offinished units budgeted for March 2007 was 10,000; 9,810 units were actually produced.

Actual results in March 2007 w'ere:

Direct materials: 98,073 kilograms used Direct manufacturing labour: 4,900 hours $ 12 3,480 Assume that there was no beginning inventory of either direct materials or finished units.

During the month, materials purchases amounted to 100,000 kilograms, at a total cost of $372,000. Price variances are isolated upon purchase. Efficiency variances are isolated at the time of usage.

Required 1. Compute the March 2007 price and efficiency variances of direct materials and direct manu¬

facturing labour. Comment on these variances.

2. Prepare journal entries to record the variances in requirement 1.

3. Why might Chemical, Inc., calculate materials-price variances and materialsefficiency variances with reference to different points in time?