Just Right Inc. produces jeans. The following standards have been established:
Direct materials (4 yards of denim @ $1.20) ...................................... $ 4.80
Direct labor (1.5 hours @ $9) .............................................................. $13.50
Standard prime cost ........................................................................... $18.30
During the year 25,000 pairs of jeans were produced. 150,000 yards of denim were purchased and used at $1.23 per yard. Actual direct labor hours were 36,800 at $9.25 per hour.
Required:
A. Compute the materials variances and indicate if they are favorable or unfavorable.
B. Compute the labor variances and indicate if they are favorable or unfavorable.
C. Prepare the journal entries for the following:
Purchase of raw materials
Issuance of raw materials
Addition of labor to Work in Process
Closing of variances to Cost of Goods Sold