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: 274,000 pounds at $2.50 per pound
- Direct materials used: 270,300 pounds
- Direct labor: 40,100 hours at $17.95 per hour
- Fixed overhead: $161,700
- Variable overhead: $122,000
Required:
1. Compute price and usage variances for direct materials.
| MPV | $fill in the blank 0ee53a06500b017_1 | |
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| MUV | $fill in the blank 0ee53a06500b017_3 | |
2. Compute the direct labor rate and labor efficiency variances.
| Labor Rate Variance | $fill in the blank 0ee53a06500b017_5 | |
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| Labor Efficiency Variance | $fill in the blank 0ee53a06500b017_7 | |
3. Compute the fixed overhead spending and volume variances.
| Spending Variance | $fill in the blank 0ee53a06500b017_9 | |
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| Volume Variance | $fill in the blank 0ee53a06500b017_11 | |
4. Compute the variable overhead spending and efficiency variances.
| Spending Variance | $fill in the blank 0ee53a06500b017_13 | |
| |
| Efficiency Variance | $fill in the blank 0ee53a06500b017_15 | |
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.
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:
Second, recognize the overhead variances: If an amount box does not require an entry, leave it blank.
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.
