Direct Materials, Direct Labor, and Overhead Variances, Journal Entries Algers Company produces dry fertilizer At the beginning of the year, Algers had the following standard cost sheet Direct materials (5 lbs $2 60) $13 00 Direct labor (0 75 hr $18 00) 13 50 Fixed overhead (0 75 hr $4 00) 3 00 Variable overhead (0 75 hr $3 00) 2 25 Standard cost per unit $31 75 Algers computes its overhead rates using practical volume, which is 54,000 units The actual results for the year are as follows Units produced 53,000 Direct materials purchased 273,000 pounds at $2 50 per pound Direct materials used 270,200 pounds Direct labor 40,100 hours at $17 95 per hour Fixed overhead $161,600 Variable overhead $122,100 Required 1 Compute price and usage variances for direct materials MPV $fill in the blank b8ef71f6bf91ffa 1 Favorable MUV $fill in the blank b8ef71f6bf91ffa 3 Unfavorable 2 Compute the direct labor rate and labor efficiency variances Labor Rate Variance $fill in the blank b8ef71f6bf91ffa 5 Favorable Labor Efficiency Variance $fill in the blank b8ef71f6bf91ffa 7 Unfavorable 3 Compute the fixed overhead spending and volume variances Spending Variance $fill in the blank b8ef71f6bf91ffa 9 Favorable Volume Variance $fill in the blank b8ef71f6bf91ffa 11 Unfavorable 4 Compute the variable overhead spending and efficiency variances Spending Variance $fill in the blank b8ef71f6bf91ffa 13 Unfavorable Efficiency Variance $fill in the blank b8ef71f6bf91ffa 15 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 Fixed OH spending variance AFOH BFOH Volume variance Budgeted fixed OH Applied fixed OH 4 Variable overhead spending variance (Actual variable OH rate (AVOR) (SVOR) Standard variable OH rate) x AH Variable overhead efficiency variance (AH SH) x SVOR 5 Prepare journal entries for the following The purchase of direct materials The issuance of direct materials to production (Work in Process) The addition of direct labor to Work in Process The addition of overhead to Work in Process The incurrence of actual overhead costs If an amount box does not require an entry, leave it blank a Materials fill in the blank a90adb0f9fca047 2 fill in the blank a90adb0f9fca047 3 Direct Materials Price Variance fill in the blank a90adb0f9fca047 5 fill in the blank a90adb0f9fca047 6 Accounts Payable fill in the blank a90adb0f9fca047 8 fill in the blank a90adb0f9fca047 9 b Work in Process fill in the blank a90adb0f9fca047 11 fill in the blank a90adb0f9fca047 12 Direct Materials Usage Variance fill in the blank a90adb0f9fca047 14 fill in the blank a90adb0f9fca047 15 Materials fill in the blank a90adb0f9fca047 17 fill in the blank a90adb0f9fca047 18 c Work in Process fill in the blank a90adb0f9fca047 20 fill in the blank a90adb0f9fca047 21 Direct Labor Efficiency Variance fill in the blank a90adb0f9fca047 23 fill in the blank a90adb0f9fca047 24 Direct Labor Rate Variance fill in the blank a90adb0f9fca047 26 fill in the blank a90adb0f9fca047 27 Wages Payable fill in the blank a90adb0f9fca047 29 fill in the blank a90adb0f9fca047 30 d Work in Process fill in the blank a90adb0f9fca047 32 fill in the blank a90adb0f9fca047 33 Variable Overhead Control fill in the blank a90adb0f9fca047 35 fill in the blank a90adb0f9fca047 36 Fixed Overhead Control fill in the blank a90adb0f9fca047 38 fill in the blank a90adb0f9fca047 39 e Variable Overhead Control fill in the blank a90adb0f9fca047 41 fill in the blank a90adb0f9fca047 42 Fixed Overhead Control fill in the blank a90adb0f9fca047 44 fill in the blank a90adb0f9fca047 45 Various Accounts fill in the blank a90adb0f9fca047 47 fill in the blank a90adb0f9fca047 48 Feedback 5 a Material purchases are accounted for by debiting Materials and crediting Accounts Payable Direct Materials Price Variance is debited or credited b Direct materials are applied to production by debiting Work in Process and crediting Materials Direct Materials Usage Variance is debited or credited c Direct labor is applied to Work in Process by debiting that account and crediting Wages Payable Direct Labor Efficiency Variance and Direct Labor Rate Variance are debited or credited d OH is applied to production by debiting Work in Process and crediting the variable and fixed OH Control accounts e The actual OH is accumulated on the debit side of the OH control accounts f Prepare journal entries for the closing out of variances to Cost of Goods Sold If an amount box does not require an entry, leave it blank First, close direct materials and direct labor variances Direct Materials Price Variance fill in the blank 990d61043006fb4 2 fill in the blank 990d61043006fb4 3 Direct Labor Rate Variance fill in the blank 990d61043006fb4 5 fill in the blank 990d61043006fb4 6 Direct Materials Usage Variance fill in the blank 990d61043006fb4 8 fill in the blank 990d61043006fb4 9 Direct Labor Efficiency Variance fill in the blank 990d61043006fb4 11 fill in the blank 990d61043006fb4 12 Cost of Goods Sold fill in the blank 990d61043006fb4 14 fill in the blank 990d61043006fb4 15 Feedback 5 f The OH variances are disposed of by closing them to Cost of Goods Sold if they are not material or by prorating them among Work in Process, Finished Goods, and Cost of Goods Sold if they are material Second, recognize the overhead variances If an amount box does not require an entry, leave it blank Fixed Overhead Volume Variance fill in the blank dce27efadff3015 2 fill in the blank dce27efadff3015 3 Variable Overhead Spending Variance fill in the blank dce27efadff3015 5 fill in the blank dce27efadff3015 6 Variable Overhead Efficiency Variance fill in the blank dce27efadff3015 8 fill in the blank dce27efadff3015 9 Fixed Overhead Spending Variance fill in the blank dce27efadff3015 11 fill in the blank dce27efadff3015 12 Fixed Overhead Control fill in the blank dce27efadff3015 14 fill in the blank dce27efadff3015 15 Variable Overhead Control fill in the blank dce27efadff3015 17 fill in the blank dce27efadff3015 18 Feedback Partially correct Third, close the overhead variances Note Close the variances with a debit balance first For compound entries, if an amount box does not require an entry, leave it blank Cost of Goods Sold fill in the blank f6e6fff5007601b 2 fill in the blank f6e6fff5007601b 3 Fixed Overhead Volume Variance fill in the blank f6e6fff5007601b 5 fill in the blank f6e6fff5007601b 6 Variable Overhead Spending Variance fill in the blank f6e6fff5007601b 8 fill in the blank f6e6fff5007601b 9 Variable Overhead Efficiency Variance fill in the blank f6e6fff5007601b 11 fill in the blank f6e6fff5007601b 12 Fixed Overhead Spending Variance fill in the blank f6e6fff5007601b 14 Cost of Goods Sold fill in the blank f6e6fff5007601b 16 in the blank f6e6fff5007601b 16

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Direct Materials, Direct Labor, and Overhead Variances, Journal Entries Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following standard

Direct Materials, Direct Labor, and Overhead Variances, Journal Entries

Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following standard cost sheet:

Direct materials (5 lbs. @ $2.60)	$13.00
Direct labor (0.75 hr. @ $18.00)	13.50
Fixed overhead (0.75 hr. @ $4.00)	3.00
Variable overhead (0.75 hr. @ $3.00)	2.25
Standard cost per unit	$31.75

Algers computes its overhead rates using practical volume, which is 54,000 units. The actual results for the year are as follows:

Units produced: 53,000
Direct materials purchased: 273,000 pounds at $2.50 per pound
Direct materials used: 270,200 pounds
Direct labor: 40,100 hours at $17.95 per hour
Fixed overhead: $161,600
Variable overhead: $122,100

Required:

1. Compute price and usage variances for direct materials.

MPV	$fill in the blank b8ef71f6bf91ffa_1	Favorable
MUV	$fill in the blank b8ef71f6bf91ffa_3	Unfavorable

2. Compute the direct labor rate and labor efficiency variances.

Labor Rate Variance	$fill in the blank b8ef71f6bf91ffa_5	Favorable
Labor Efficiency Variance	$fill in the blank b8ef71f6bf91ffa_7	Unfavorable

3. Compute the fixed overhead spending and volume variances.

Spending Variance	$fill in the blank b8ef71f6bf91ffa_9	Favorable
Volume Variance	$fill in the blank b8ef71f6bf91ffa_11	Unfavorable

4. Compute the variable overhead spending and efficiency variances.

Spending Variance	$fill in the blank b8ef71f6bf91ffa_13	Unfavorable
Efficiency Variance	$fill in the blank b8ef71f6bf91ffa_15	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. Fixed OH spending variance = AFOH - BFOH Volume variance = Budgeted fixed OH Applied fixed OH

4. Variable overhead spending variance = (Actual variable OH rate (AVOR) (SVOR) Standard variable OH rate) x AH Variable overhead efficiency variance = (AH SH) x SVOR

5. Prepare journal entries for the following:

The purchase of direct materials
The issuance of direct materials to production (Work in Process)
The addition of direct labor to Work in Process
The addition of overhead to Work in Process
The incurrence of actual overhead costs

If an amount box does not require an entry, leave it blank.

a.	Materials	fill in the blank a90adb0f9fca047_2	fill in the blank a90adb0f9fca047_3
	Direct Materials Price Variance	fill in the blank a90adb0f9fca047_5	fill in the blank a90adb0f9fca047_6
	Accounts Payable	fill in the blank a90adb0f9fca047_8	fill in the blank a90adb0f9fca047_9
b.	Work in Process	fill in the blank a90adb0f9fca047_11	fill in the blank a90adb0f9fca047_12
	Direct Materials Usage Variance	fill in the blank a90adb0f9fca047_14	fill in the blank a90adb0f9fca047_15
	Materials	fill in the blank a90adb0f9fca047_17	fill in the blank a90adb0f9fca047_18
c.	Work in Process	fill in the blank a90adb0f9fca047_20	fill in the blank a90adb0f9fca047_21
	Direct Labor Efficiency Variance	fill in the blank a90adb0f9fca047_23	fill in the blank a90adb0f9fca047_24
	Direct Labor Rate Variance	fill in the blank a90adb0f9fca047_26	fill in the blank a90adb0f9fca047_27
	Wages Payable	fill in the blank a90adb0f9fca047_29	fill in the blank a90adb0f9fca047_30
d.	Work in Process	fill in the blank a90adb0f9fca047_32	fill in the blank a90adb0f9fca047_33
	Variable Overhead Control	fill in the blank a90adb0f9fca047_35	fill in the blank a90adb0f9fca047_36
	Fixed Overhead Control	fill in the blank a90adb0f9fca047_38	fill in the blank a90adb0f9fca047_39
e.	Variable Overhead Control	fill in the blank a90adb0f9fca047_41	fill in the blank a90adb0f9fca047_42
	Fixed Overhead Control	fill in the blank a90adb0f9fca047_44	fill in the blank a90adb0f9fca047_45
	Various Accounts	fill in the blank a90adb0f9fca047_47	fill in the blank a90adb0f9fca047_48

Feedback

5. a. Material purchases are accounted for by debiting Materials and crediting Accounts Payable. Direct Materials Price Variance is debited or credited. b. Direct materials are applied to production by debiting Work in Process and crediting Materials. Direct Materials Usage Variance is debited or credited. c. Direct labor is applied to Work in Process by debiting that account and crediting Wages Payable. Direct Labor Efficiency Variance and Direct Labor Rate Variance are debited or credited. d. OH is applied to production by debiting Work in Process and crediting the variable and fixed OH Control accounts. e. The actual OH is accumulated on the debit side of the OH control accounts.

f. Prepare journal entries for the closing out of variances to Cost of Goods Sold. If an amount box does not require an entry, leave it blank.

First, close direct materials and direct labor variances:

Direct Materials Price Variance	fill in the blank 990d61043006fb4_2	fill in the blank 990d61043006fb4_3
Direct Labor Rate Variance	fill in the blank 990d61043006fb4_5	fill in the blank 990d61043006fb4_6
Direct Materials Usage Variance	fill in the blank 990d61043006fb4_8	fill in the blank 990d61043006fb4_9
Direct Labor Efficiency Variance	fill in the blank 990d61043006fb4_11	fill in the blank 990d61043006fb4_12
Cost of Goods Sold	fill in the blank 990d61043006fb4_14	fill in the blank 990d61043006fb4_15

Feedback

5. f. The OH variances are disposed of by closing them to Cost of Goods Sold if they are not material or by prorating them among Work in Process, Finished Goods, and Cost of Goods Sold if they are material.

Second, recognize the overhead variances: If an amount box does not require an entry, leave it blank.

Fixed Overhead Volume Variance	fill in the blank dce27efadff3015_2	fill in the blank dce27efadff3015_3
Variable Overhead Spending Variance	fill in the blank dce27efadff3015_5	fill in the blank dce27efadff3015_6
Variable Overhead Efficiency Variance	fill in the blank dce27efadff3015_8	fill in the blank dce27efadff3015_9
Fixed Overhead Spending Variance	fill in the blank dce27efadff3015_11	fill in the blank dce27efadff3015_12
Fixed Overhead Control	fill in the blank dce27efadff3015_14	fill in the blank dce27efadff3015_15
Variable Overhead Control	fill in the blank dce27efadff3015_17	fill in the blank dce27efadff3015_18

Feedback

Partially correct

Third, close the overhead variances: Note: Close the variances with a debit balance first. For compound entries, if an amount box does not require an entry, leave it blank.

Cost of Goods Sold	fill in the blank f6e6fff5007601b_2	fill in the blank f6e6fff5007601b_3
Fixed Overhead Volume Variance	fill in the blank f6e6fff5007601b_5	fill in the blank f6e6fff5007601b_6
Variable Overhead Spending Variance	fill in the blank f6e6fff5007601b_8	fill in the blank f6e6fff5007601b_9
Variable Overhead Efficiency Variance	fill in the blank f6e6fff5007601b_11	fill in the blank f6e6fff5007601b_12
Fixed Overhead Spending Variance	fill in the blank f6e6fff5007601b_14
Cost of Goods Sold		fill in the blank f6e6fff5007601b_16