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: a. Units produced: 53,000 b. Direct materials purchased: 274,000 pounds at $2.50 per pound c. Direct materials used: 270,300 pounds d. Direct labor: 40,100 hours at $17.95 per hour e. Fixed overhead: $161,700 f. Variable overhead: $122,000 Required: 1. Compute price and usage variances for direct materials. MPV 27,400 Favorable 13,780 Unfavorable MUV S 2. Compute the direct labor rate and labor efficiency variances. Labor Rate Variance 2,005 Favorable Labor Efficiency Variance hann Unfavorable 2. Compute the direct labor rate and labor efficiency variances. Labor Rate Variance 2,005 Favorable Labor Efficiency Variance 6,300 Unfavorable 3. Compute the fixed overhead spending and volume variances. Spending Variance Favorable Volume Variance 3,000 Unfavorable 4. Compute the variable overhead spending and efficiency variances. 300 1,700 Unfavorable Spending Variance Efficiency Variance 1,050 Unfavorable Feedback 5. Prepare journal entries for the following: a. The purchase of direct materials b. The issuance of direct materials to production (Work in Process) c. The addition of direct labor to Work in Process d. The addition of overhead to Work in Process e. The incurrence of actual overhead costs If an amount box does not require an entry, leave it blank. a. Materials 712,400 Direct Materials Price Variance 27,400 If an amount box does not require an entry, leave it blank. a. Materials 712,400 Direct Materials Price Variance 27,400 Accounts Payable 685,000 689,000 b. Work in Process Direct Materials Usage Variance 13,780 Materials 702,780 c. Work in Process 715,500 6,300 Direct Labor Efficiency Variance Direct Labor Rate Variance Wages Payable 2,005 719,795 278,250 d. Work in Process Variable Overhead Control Fixed Overhead Control 119,250 159,000 e. Variable Overhead Control 122,000 Fixed Overhead Control 161,700 Accounts Payable 283,700 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 27,400 X 13,780 X First, close direct materials and direct labor variances: Direct Materials Price Variance Direct Materials Usage Variance Direct Labor Rate Variance Direct Labor Efficiency Variance Cost of Goods Sold X 2,005 x 6,300 9,325 Feedback > Second, recognize the overhead variances: If an amount box does not require an entry, leave it blank. Feedback DO Second, recognize the overhead variances: If an amount box does not require an entry, leave it blank. Feedback 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 pu art ar o Feedback
