Question

Direct Materials and Direct Labor Variances

Zoller Company produces a dark chocolate candy bar. Recently, the company adopted the following standards for one bar of the candy:

Direct materials (6.30 oz. @ $0.20)	$1.26
Direct labor (0.08 hr. @ $18.00)	1.44
Standard prime cost	$2.70

During the first week of operation, the company experienced the following actual results:

1. Bars produced: 141,000.
2. Ounces of direct materials purchased: 888,600 ounces at $0.21 per ounce.
3. There are no beginning or ending inventories of direct materials.
4. Direct labor: 11,140 hours at $17.30.

Required:

Instructions for parts 1 and 2: If a variance is zero, enter "0" and select "Not applicable" from the drop down box.

1. Compute price and usage variances for direct materials.

Materials Price Variance	$
Materials Usage Variance	$

2. Compute the rate variance and the efficiency variance for direct labor.

Labor Rate Variance	$
Labor Efficiency Variance	$

3. Prepare the journal entries associated with direct materials and direct labor. If an amount box does not require an entry, leave it blank or enter "0".

	Record purchase of materials
	Record usage of materials
	Record labor variances

Answer 1

1. Calculate the direct materials price and usage variances.

Materials Price Variance	(0.20-0.21)*888600 =	8886 U
Materials Usage Variance	(141000*6.3-888600)*.20 =	60 U

2. Calculate the direct labor rate and efficiency variances.

Labor Rate Variance	(18-17.30)*11140	7798 F
Labor Efficiency Variance	(11280-11140)*18	2520 F

3. Prepare the journal entries for (1) the direct materials price variance, (2) the direct materials usage variance, and (3) the direct labor variances. If an amount box does not require an entry, leave it blank or enter "0".

1.	Direct material	177720
	Material price variance	8886
	Account payable		186606
2.	Work in process	177660
	Material quantity variance	60
	Direct material		177720
3.	Work in process	203040
	Labor rate variance		7798
	Labor efficiency variance		2520
	Wages payable		192722