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 (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

Overhead rates are computed using practical volume, which is 54,000 units. The actual results for the year are as follows:

Units produced: 53,000

Direct materials purchased: 265,000 pounds @ $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: $122,100

Required:

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1. Compute price and usage variances for direct materials.

MPV	$fill in the blank 5c454dfb601102a_1	FavorableUnfavorable
MUV	$fill in the blank 5c454dfb601102a_3	FavorableUnfavorable

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

Labor Rate Variance	$fill in the blank 5c454dfb601102a_5	FavorableUnfavorable
Labor Efficiency Variance	$fill in the blank 5c454dfb601102a_7	FavorableUnfavorable

3. Compute the fixed overhead spending and volume variances.

Spending Variance	$fill in the blank 5c454dfb601102a_9	FavorableUnfavorable
Volume Variance	$fill in the blank 5c454dfb601102a_11	FavorableUnfavorable

4. Compute the variable overhead spending and efficiency variances.

Spending Variance	$fill in the blank 5c454dfb601102a_13	FavorableUnfavorable
Efficiency Variance	$fill in the blank 5c454dfb601102a_15	FavorableUnfavorable

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

First, close direct materials and direct labor variances:

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

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Second, recognize the overhead variances:

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

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Third, close the overhead variances: Note: Close the variances with a debit balance first.

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