# Direct Materials and Labor Variances

Required:

1.) For direct materials:
a.) Compute the direct materials price and quantity of variances.
b.) Prepare journal entries to record the purchase of materials and the use of materials
in production.

2.) For direct labor:
a.) Compute the direct labor rate and efficiency variances.
b.) Prepare a journal entry to record the incurrence of direct labor cost for the month.

3.) Post the entries you have prepared to the following T-accounts. (on excel spreadsheet/other document)

#### Solution Preview

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a.) Compute the direct materials price and quantity of variances.

Material Price Variance = (AP-SP) AQ
Actual Price AP = 5.75
Standard Price SP = 6.00
AQ = Quantity Purchased = 7,000
Material Price Variance = (5.75-6)7,000 = 1,750 F

Material Quantity Variance = (AQ-SQ) SP
AQ = Actual quantity used = 6,000
SQ = Standard Quantity = 1,500 units X 3.5 feet per unit = 5,250
SP = 6.00
Material Quantity Variance = (6,000-5,250) 6 = 4,500 U

b.) Prepare journal entries to record the purchase of materials and the use of materials
in production.

In preparing the journal entries, the raw material inventory is recorded at standard cost and the accounts payable at actual and the difference ...