The

SenecaSeneca

Corporation manufactures lamps. It has set up the following standards per finished unit for direct materials and direct manufacturing labor:

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(Click the icon to view the standards.)The number of finished units budgeted for January

20172017

was

9 comma 9109,910;

9 comma 9009,900

units were actually produced.

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(Click the icon to view actual data.)Assume that there was no beginning inventory of either direct materials or finished units. During the month, materials purchased amounted to

99 comma 10099,100

lb., at a total cost of

$ 525 comma 230$525,230.

Input price variances are isolated upon purchase. Input-efficiency variances are isolated at the time of usage.Read the requirements

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.Requirement 1. Compute the January

20172017

price and efficiency variances of direct materials and direct manufacturing labor.

Let's begin by calculating the actual input at the budgeted price. (Round your answers to the nearest whole dollar.)

	Actual input	x	Budgeted price	=	Cost
Direct materials (purchases)	99100	x	5.10	=	505410
Direct materials (usage)	97000	x	5.10	=	494700
Direct manufacturing labor	4800	x	29	=	139200

Next determine the formula and calculate the costs for the flexible budget.

	Budgeted input for actual output	x	Budgeted price	=	Flexible budget cost
Direct materials	51	x	9900	=	504900
Direct manufacturing labor	14.50	x	9900	=	143550

Now compute the price and efficiency variances for direct materials and direct manufacturing labor. Label each variance as favorable (F) or unfavorable (U).

	Price		Efficiency
	variances		variances
Direct materials
Direct manufacturing labor

Requirement 2. Prepare journal entries to record the variances in requirement 1.

Prepare the journal entry for the direct materials price variance. (Record debits first, then credits. Exclude explanations from any journal entries.)

Journal Entry
Date		Accounts	Debit	Credit
			505410

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. Comment on the January

20172017

price and efficiency variances of

SenecaSeneca

Corporation.A key point is that

all of these efficiency variances are

the direct manufacturing labor efficiency variance is

the direct materials efficiency variance is

likely to be

insignificant

significant

. They are so

big that they are meaningful

small as to be nearly meaningless

. Fluctuations about standards are bound to occur in a

predetermined

random

fashion. Practically, from a control viewpoint, a standard is a band or range of acceptable performance rather than a single-figure measure.Requirement 4. Why might

SenecaSeneca

calculate direct materials price variances and direct materials efficiency variances with reference to different points in time?The purchasing point is where responsibility for

efficiency variances

price variances

is found most often. The production point is where responsibility for

efficiency variances

price variances

is found most often.

SenecaSeneca

Corporation may calculate variances at different points in time to tie in with

only the production responsibility area.

only the purchasing responsibility area.

the different responsibility areas.

Choose from any list or enter any number in the input fields and then continue to the next question.

Standards

Direct materials: 10 lb. at $5.10 per lb.	$51.00
Direct manufacturing labor: 0.5 hour at $29 per hour	14.50

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Actual Data

Actual results in January

20172017

were as follows:

Direct materials: 97,000 lb. used
Direct manufacturing labor: 4,900 hours	$150,675