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:

Paper pulp (3 lbs. @ $0.40)	$ 1.20
Labor (2 hrs. @ $12)	24.00
Total prime cost	$25.20

During the first quarter of the year, Jameson produced 40,000 cases of paper towels. The company purchased and used 120,700 pounds of paper pulp at $0.38 per pound. Actual direct labor used was 81,000 hours at $12.20 per hour.

Required:

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

1. Calculate the direct materials price and usage variances.

Materials Price Variance	$	Favorable
Materials Usage Variance	$	Unfavorable

2. Calculate the direct labor rate and efficiency variances.

Labor Rate Variance	$	Unfavorable
Labor Efficiency Variance	$	Unfavorable

Feedback

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.	Materials
	Direct Materials Price Variance
	Accounts Payable
2.	Work in Process
	Direct Materials Usage Variance
	Materials
3.	Work in Process
	Direct Labor Efficiency Variance
	Direct Labor Rate Variance
	Wages Payable