Direct Materials and Direct Labor Variances

Berner Company produces a dark chocolate candy bar. Recently, the company adopted the following standards for one bar of the candy:

Direct materials (8.20 oz. @ $0.09)	$0.74
Direct labor (0.07 hr. @ $18.00)	1.26
Standard prime cost	$2.00

During the first week of operation, the company experienced the following actual results:

1. Bars produced: 141,000.
2. Ounces of direct materials purchased: 1,156,500 ounces at $0.08 per ounce.
3. There are no beginning or ending inventories of direct materials.
4. Direct labor: 9,730 hours at $17.20.

Required:

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

1. Compute price and usage variances for direct materials.

Materials Price Variance	$____	Favorable
Materials Usage Variance	$___	Unfavorable

2. Compute the rate variance and the efficiency variance for direct labor.

Labor Rate Variance	$___	Favorable
Labor Efficiency Variance	$___	Favorable

3. Prepare the journal entries associated with direct materials and direct labor. If an amount box does not require an entry, leave it blank.

	Materials	___	____
	Direct Materials Price Variance	___	____
	Accounts Payable	____	___
	Record purchase of materials
	Work in Process	___	____
	Direct Materials Usage Variance	___	___
	Materials	___	___
	Record usage of materials
	Work in Process	___	___
	Direct Labor Rate Variance	____	____
	Direct Labor Efficiency Variance	___	___
	Wages Payable	___	___
	Record labor variances