Standard Costs, Decomposition of Budget Variances, Direct Materials and Direct Labor

EZ Tees Corporation produces T-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, EZ Tees produced 9,600 T-shirts. The actual fabric purchased was 14,300 yards at $2.76 per yard. There were no beginning or ending inventories of fabric. Actual direct labor was 10,680 hours at $19.50 per hour.

Required:

Question Content Area

1. Compute the costs of fabric and direct labor that should have been incurred for the production of 9,600 T-shirts.

Direct materials	$fill in the blank 2e7a7705efd6f85_1
Direct labor	$fill in the blank 2e7a7705efd6f85_2

2. Compute the total budget variances for direct materials and direct labor.

Direct materials	$fill in the blank 2e7a7705efd6f85_3	FavorableUnfavorable
Direct labor	$fill in the blank 2e7a7705efd6f85_5	FavorableUnfavorable

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

Materials Price Variance	$fill in the blank 2e7a7705efd6f85_7	FavorableUnfavorable
Materials Usage Variance	$fill in the blank 2e7a7705efd6f85_9	FavorableUnfavorable

Question Content Area

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

Price Variance	Accounts PayableCashCost of Goods SoldDirect Materials Usage VarianceMaterialsWork in Process	- Select -	- Select -
	Accounts ReceivableCashCost of Goods SoldDirect Materials Price VarianceWork in Process	- Select -	- Select -
	Accounts PayableDirect Materials Usage VarianceFinished GoodsMaterialsWork in Process	- Select -	- Select -
Usage Variance	Accounts PayableCashDirect Materials Price VarianceMaterialsOverhead ControlWork in Process	- Select -	- Select -
	Accounts PayableDirect Materials Usage VarianceFinished GoodsOverhead Control Work in Process	- Select -	- Select -
	Accounts PayableCashDirect LaborMaterialsWork in Process	- Select -	- Select -

Question Content Area

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

Labor Rate Variance	$fill in the blank 41b32e007fd1047_1	FavorableUnfavorable
Labor Efficiency Variance	$fill in the blank 41b32e007fd1047_3	FavorableUnfavorable

Question Content Area

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

blank	Accounts PayableCashDirect Materials Price VarianceDirect Materials Usage VarianceMaterialsOverhead ControlWork in Process	- Select -	- Select -
	Accounts PayableCashDirect Labor Efficiency VarianceDirect Materials Price VarianceDirect Materials Usage VarianceMaterialsFinished Goods	- Select -	- Select -
	Accounts PayableCashDirect Labor Rate VarianceDirect Materials Price VarianceDirect Materials Usage VarianceFinished GoodsMaterials	- Select -	- Select -
	Direct Labor Efficiency VarianceDirect Labor Rate VarianceFinished GoodsWages PayableWork in Process	- Select -	- Select -