Haversham Corporation produces dress shirts. The company uses a standard costing system and has set the following standards for direct materials and direct labor (for one shirt):

Fabric (1.5 yds. @ $2.80)	$4.20
Direct labor (1.1 hr. @ $20)	22.00
Total prime cost	$26.20

During the year, Haversham produced 9,700 shirts. The actual fabric purchased was 14,450 yards at $2.76 per yard. There were no beginning or ending inventories of fabric. Actual direct labor was 10,790 hours at $19.50 per hour.

. Break down the total budget variance for direct materials into a price variance and a usage variance.

Materials Price Variance	$	Favorable
Materials Usage Variance	$	Favorable

3

Prepare the journal entries associated with these variances. If an amount box does not require an entry, leave it blank or enter "0".

Price Variance	Materials
	Direct Materials Price Variance
	Accounts Payable
Usage Variance	Work in Process
	Direct Materials Usage Variance
	Materials

4. Break down the total budget variance for direct labor into a rate variance and an efficiency variance.

Labor Rate Variance	$	Favorable
Labor Efficiency Variance	$	Unfavorable

4.

Prepare the journal entries associated with these variances. If an amount box does not require an entry, leave it blank or enter "0".

	Work in Process
	Direct Labor Efficiency Variance
	Direct Labor Rate Variance
	Wages Payable