Question

ABC corporation produced 20,500 clock radios. ABC corporation had no material in beginning or ending inventory. the total standard and actual costs for materials and direct labor for one clock radio are as follows:

Materials:

standard: 1.5 pounds at $6 per pound; STANDARD=$9

actual: 2 pounds at $6.2 per pound; ACTUAL =$12.4

direct labor:

standard: .75 hours at $11.4 per hour; STANDARD=$8.55

actual: .5 hours at $10 per hour ; ACTUAL=$5

calculate direct materials price and usage variance and state if it is favorable or unfavorable

AND what are the journal entries to record direct materials variances?

Answer 1

Direct material price variance = (Standard price - Actual price) x Actual quantity

= (6 -  6.2) x 41,000

= -8,200 Unfavourable

Direct material usage variance = (Standard usage - Actual usage) x Standard cost

= ( 30,750 - 41,000) x 1.5

= -15,375 unfavourable

Account	Debit	Credit
Raw material inventory (41,000 × 6)	246,000
Direct material price variance	8,200
Account payable		254,200
Work in progress inventory (30,750 × 1.5)	46,125
Direct material usage variance	15,375
Raw material inventory ( 41,000 × 1.5)		61,500