STANDARD COST SYSTEM: VARIANCES AND ENTRIES:

Company B uses a standard cost system to control manufacturing costs. All expenditures were on account.

Standards to produce one unit of finished product:

Direct materials: 2 lbs. @ $8.00 per lb.

Direct labor: 6 hours at $20.00 per hour

Actual results:

Actual production: 62,000 units

Actual materials purchased: 130,000 lbs. @ $8.20 per lb.

Actual materials used: 125,000 lbs

Actual direct labor usage: 370,000 hours

Actual direct labor costs: $ 7,585,000

REQUIRED: COMPUTE (must show calculations) and indicate whether favorable (F) or unfavorable (U) variance

Direct materials price variance $____________ U F

Direct materials quantity variance: $_________U F

Direct labor rate (price) variance: $__________U F

Direct labor efficiency (quantity) var.$________U F

JOURNAL ENTRIES

Including the related variances:

1. Journalize the purchase of direct materials on account:

2. Journalize the usage of direct materials:

3. Journalize the usage of direct labor:

4. Journalize the closing entry assuming that the variances taken together are immaterial: