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: $13.00 Direct materials (5 lbs. @ $2.60) Direct labor (0.75 hr. @ $18.00) 13.50 3.00 Fixed overhead (0.75 hr. @ $4.00) 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: 273,000 pounds at $2.50 per pound C. Direct materials used: 270,400 pounds d. Direct labor: 40,100 hours at $17.95 per hour e. Fixed overhead: $161,800 f. Variable overhead: $121,900 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 a. If an amount box does not require an entry, leave it blank. Materials 709,800 Direct Materials Price Variance Accounts Payable 27,300 682,500 b. Work in Process Direct Materials Usage Variance Materials Work in Process C. Direct Labor Efficiency Variance Direct Labor Rate Variance Wages Payable III III IIII III III IIII III III d. Work in Process Variable Overhead Control Fixed Overhead Control e. Variable Overhead Control Fixed Overhead Control Various Accounts First, close direct materials and direct labor variances: Direct Materials Price Variance Direct Labor Rate Variance Direct Materials Usage Variance Direct Labor Efficiency Variance Cost of Goods Sold 11111 Feedback Check My Work Second, recognize the overhead variances: If an amount box does not require an entry, leave it blank. Fixed Overhead Volume Variance Variable Overhead Spending Variance Variable Overhead Efficiency Variance Fixed Overhead Spending Variance Fixed Overhead Control LIIIII Variable Overhead Control Feedback Check My Work 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 Fixed Overhead Volume Variance Variable Overhead Spending Variance Variable Overhead Efficiency Variance 1110 1111 Fixed Overhead Spending Variance Cost of Goods Sold