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

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

Direct materials (8 lbs. @ $1.35)	$10.80
Direct labor (0.15 hr. @ $18.00)	2.70
Fixed overhead (0.20 hr. @ $3.00)	0.60
Variable overhead (0.20 hr. @ $1.70)	0.34
Standard cost per unit	$14.44

Overhead rates are computed using practical volume, which is 49,000 units. The actual results for the year are as follows:

1. Units produced: 53,000
2. Direct materials purchased: 408,000 pounds at $1.32 per pound
3. Direct materials used: 407,000 pounds
4. Direct labor: 10,500 hours at $17.95 per hour
5. Fixed overhead: $36,570
6. Variable overhead: $18,000

Required:

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1. Compute price and usage variances for direct materials.

MPV	$fill in the blank 1a8600fb9fbafba_1	FavorableUnfavorableUnfavorable
MUV	$fill in the blank 1a8600fb9fbafba_3	FavorableUnfavorableFavorable

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

Labor Rate Variance	$fill in the blank 1a8600fb9fbafba_5	FavorableUnfavorableFavorable
Labor Efficiency Variance	$fill in the blank 1a8600fb9fbafba_7	FavorableUnfavorableUnfavorable

3. Compute the fixed overhead spending and volume variances.

Spending Variance	$fill in the blank 1a8600fb9fbafba_9	FavorableUnfavorableUnfavorable
Volume Variance	$fill in the blank 1a8600fb9fbafba_11	FavorableUnfavorableFavorable

4. Compute the variable overhead spending and efficiency variances.

Spending Variance	$fill in the blank 1a8600fb9fbafba_13	FavorableUnfavorableUnfavorable
Efficiency Variance	$fill in the blank 1a8600fb9fbafba_15	FavorableUnfavorableUnfavorable

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5. Prepare journal entries for the following:

1. The purchase of direct materials
2. The issuance of direct materials to production (Work in Process)
3. The addition of direct labor to Work in Process
4. The addition of overhead to Work in Process
5. The incurrence of actual overhead costs

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

a.	Accounts PayableDirect Labor Efficiency VarianceDirect Labor Rate VarianceDirect Materials Price VarianceMaterials	- Select -	- Select -
	Direct Materials Price VarianceDirect Materials Usage VarianceFixed Overhead ControlMaterialsVarious Accounts	- Select -	- Select -
	Accounts PayableDirect Labor Efficiency VarianceDirect Labor Rate VarianceDirect Materials Usage VarianceFixed Overhead Control	- Select -	- Select -
b.	MaterialsVariable Overhead ControlVarious AccountsWages PayableWork in Process	- Select -	- Select -
	Direct Materials Price VarianceDirect Materials Usage VarianceFixed Overhead ControlMaterialsVarious Accounts	- Select -	- Select -
	Accounts PayableDirect Labor Efficiency VarianceDirect Labor Rate VarianceDirect Materials Price VarianceMaterials	- Select -	- Select -
c.	MaterialsVariable Overhead ControlVarious AccountsWages PayableWork in Process	- Select -	- Select -
	Direct Labor Efficiency VarianceDirect Labor Rate VarianceDirect Materials Price VarianceDirect Materials Usage VarianceFixed Overhead Control	- Select -	- Select -
	Direct Labor Rate VarianceDirect Materials Price VarianceDirect Materials Usage VarianceFixed Overhead ControlMaterials	- Select -	- Select -
	Fixed Overhead ControlMaterialsVariable Overhead ControlVarious AccountsWages Payable	- Select -	- Select -
d.	Accounts PayableDirect Labor Efficiency VarianceDirect Labor Rate VarianceWages PayableWork in Process	- Select -	- Select -
	Direct Materials Price VarianceDirect Materials Usage VarianceMaterialsVarious AccountsVariable Overhead Control	- Select -	- Select -
	Fixed Overhead ControlMaterialsVarious AccountsWages PayableWork in Process	- Select -	- Select -
e.	MaterialsVariable Overhead ControlVarious AccountsWages PayableWork in Process	- Select -	- Select -
	Fixed Overhead ControlMaterialsVarious AccountsWages PayableWork in Process	- Select -	- Select -
	Accounts PayableDirect Labor Efficiency VarianceDirect Labor Rate VarianceMaterialsVarious Accounts	- Select -	- Select -

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

First, close direct materials and direct labor variances:

	Cost of Goods SoldDirect Labor Rate VarianceDirect Materials Price VarianceVariable Overhead ControlVariable Overhead Spending Variance	- Select -	- Select -
	Direct Labor Rate VarianceDirect Materials Price VarianceDirect Materials Usage VarianceVariable Overhead ControlVariable Overhead Spending Variance	- Select -	- Select -
	Cost of Goods SoldDirect Labor Efficiency VarianceDirect Labor Rate VarianceDirect Materials Usage Variance	- Select -	- Select -
	Direct Labor Efficiency VarianceDirect Labor Rate VarianceDirect Materials Price VarianceVariable Overhead ControlVariable Overhead Spending Variance	- Select -	- Select -
	Cost of Goods SoldDirect Labor Efficiency VarianceDirect Materials Price VarianceDirect Materials Usage Variance	- Select -	- Select -

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Second, recognize the overhead variances: Post amounts from highest to lowest. If an amount box does not require an entry, leave it blank.

	Cost of Goods SoldFixed Overhead Volume VarianceVariable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending Variance	- Select -	- Select -
	Cost of Goods SoldFixed Overhead ControlVariable Overhead ControlFixed Overhead Spending VarianceWork in Process	- Select -	- Select -
	Cost of Goods SoldFixed Overhead ControlFixed Overhead Volume VarianceVariable Overhead Efficiency VarianceVariable Overhead Spending Variance	- Select -	- Select -
	Cost of Goods SoldFixed Overhead ControlFixed Overhead Volume VarianceVariable Overhead ControlWork in Process	- Select -	- Select -
	Cost of Goods SoldFixed Overhead Spending VarianceFixed Overhead Volume VarianceVariable Overhead Efficiency VarianceVariable Overhead Spending Variance	- Select -	- Select -
	Cost of Goods SoldFixed Overhead ControlVariable Overhead ControlVariable Overhead Spending VarianceWork in Process	- Select -	- Select -

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Third, close the overhead variances: Post amounts from highest to lowest. If an amount box does not require an entry, leave it blank.

	Cost of Goods SoldFixed Overhead ControlFixed Overhead Volume VarianceVariable Overhead ControlWork in Process	- Select -	- Select -
	Cost of Goods SoldFixed Overhead ControlVariable Overhead ControlVariable Overhead Efficiency VarianceWork in Process	- Select -	- Select -
	Cost of Goods SoldFixed Overhead ControlVariable Overhead ControlVariable Overhead Spending VarianceWork in Process	- Select -	- Select -
	Cost of Goods SoldFixed Overhead Spending VarianceFixed Overhead Volume VarianceVariable Overhead Efficiency VarianceVariable Overhead Spending Variance	- Select -	- Select -
	Cost of Goods SoldFixed Overhead Spending VarianceFixed Overhead Volume VarianceVariable Overhead Efficiency VarianceVariable Overhead Spending Variance	- Select -	- Select -