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InstituteInstitute

Corn Hole is a small business that

JacksonJackson

Morris developed while in college. He began building wooden corn hole game sets for friends, hand painted with college colors and logos. As demand grew, he hired some workers and began to manage the operation.

InstituteInstitute

Corn hole maintains two departments: contstruction and painting. In the construction department, the games require wood and labor.

InstituteInstitute

Corn Hole has some employees who have been with the company for a very long time and others who are new and inexperienced.

Requirement 1. For the construction department, calculate the price and efficiency variances for the wood and the price and efficiency variances for direct manufacturing labor. Label each variance as favorable (F) or unfavorable (U).

Begin by calculating the price and efficiency variances for the wood.

Price variance
Efficiency variance

Calculate the price and efficiency variances for direct manufacturing labor.

Price variance
Efficiency variance

Requirement 2. Record the journal entries for the variances incurred. (Record debits first, then credits. Exclude explanations from any journal entries.)

Prepare the journal entry for the direct materials price variance.

Journal Entry
Date		Accounts	Debit	Credit

Next prepare the journal entry for direct materials efficiency variance.

Journal Entry
Date		Accounts	Debit	Credit

Now prepare the journal entry for direct manufacturing labor price and efficiency variances.

Journal Entry
Date		Accounts	Debit	Credit

Requirement 3. Discuss logical explanations for the combination of variances that

InstituteInstitute

experienced.

JacksonJackson

paid

less

more

for the wood. As a result, the wood was

higher

lower

quality and workers used

less

more

of it.

JacksonJackson

used

less

more

experienced workers in September than he usually does. This resulted in payment of

higher

lower

wages per hour. The new workers were

less

more

efficient and took

fewer

more

hours than normal.

Overall,

JacksonJackson's

total wage bill was

higher

lower

than expected.

InstituteInstitute

Corn Hole uses standard costing for the game sets.

JacksonJackson

expects that a typical set should take

4

hours of labor in the construction department, and the standard wage rate is

$10.00

per hour. An average set uses

22

square feet ofwood, allowing for a certain amount of scrap. Because of the nature of the wood, workers must work around the flaws in the materials.

JacksonJackson

shops around for good deals and expects to pay

$4.30

per square foot.

JacksonJackson

does not store inventory, and buys the wood as he receives an order.

For the month of September,

JacksonJackson's

workers produced

7575

corn hole sets using

308

hours and

1,750

square feet of wood.

JacksonJackson

bought wood for $7,200

(and used the entire quantity), and incurred labor costs of$2,945.

1.	For the construction department, calculate the price and efficiency variances for the wood and the price and efficiency variances for direct manufacturing labor.
2.	Record the journal entries for the variances incurred.
3.	Discuss logical explanations for the combination of variances that the construction department of InstituteInstitute Corn Hole experienced.