The following standard costs have been established for the production of ONE unit of product X:

During the period, based on their budgeted sales projections, they purchased 3,400 lbs. of direct materials. The company uses a standard costing system for recording all inventory transactions and records direct materials price variances at the time of purchase.

As the year unfolded, demand for the Product X was not as strong as originally anticipated and actual production and sales amounted to 500 units. The following actual costs were incurred in connection with the production of the 500 units during the year:

REQUIRED:

1. For both direct materials AND direct labor, please compute all variances and present them in logical fashion, offering a possible explanation as to the cause of each.
2. Provide the journal entries for:

Direct materials purchases

Direct materials usage

Closing of all variances assuming that they are considered immaterial.