Question

DM & DL variances; journal entries
In July, Zinger Corp. purchased 20,000 gallons of Numerol for $61,000 to use in the production of product #43MR7. During July, Zinger Corp. manufactured 3,900 units of product #43MR7. The following information is available about standard and actual quantities and costs:

Standard for One Unit
Direct material 4.8 gallons @ $3 per gallon
Direct labor 20 minutes @ $9 per DLH

Actual Usage for July
Direct material 18,350 gallons
Direct labor 1,290 DLHs @ $9.02 per DLH

a. Compute the material purchase price variance and the material quantity variance.
Note: Do not use a negative sign with your answers.

Material price variance		FavorableUnfavorableNeither favorable or unfavorable
Material quantity variance		FavorableUnfavorableNeither favorable or unfavorable

b. Compute the labor rate, labor efficiency, and total labor variance.
Note: Do not use a negative sign with your answers.
Note: Round your final answer to the nearest whole dollar.

Labor rate variance		FavorableUnfavorableNeither favorable or unfavorable
Labor efficiency variance		FavorableUnfavorableNeither favorable or unfavorable
Total labor variance		FavorableUnfavorableNeither favorable or unfavorable

c. Prepare the journal entries for the material and labor variances.
Note: Round amounts to the nearest whole dollar.
Note: Record any multiple debits or any multiple credits in alphabetical order by account name.

Account	Debit	Credit
Accounts PayableCost of Good SoldLabor Efficiency VarianceLabor Rate VarianceMaterial Price VarianceMaterial Quantity VarianceOH Spending VarianceRaw Material InventoryVOH Efficiency VarianceVolume VarianceWages PayableWork in Process Inventory
Accounts PayableCost of Good SoldLabor Efficiency VarianceLabor Rate VarianceMaterial Price VarianceMaterial Quantity VarianceOH Spending VarianceRaw Material InventoryVOH Efficiency VarianceVolume VarianceWages PayableWork in Process Inventory
Accounts PayableCost of Good SoldLabor Efficiency VarianceLabor Rate VarianceMaterial Price VarianceMaterial Quantity VarianceOH Spending VarianceRaw Material InventoryVOH Efficiency VarianceVolume VarianceWages PayableWork in Process Inventory
To record material price variance
Accounts PayableCost of Good SoldLabor Efficiency VarianceLabor Rate VarianceMaterial Price VarianceMaterial Quantity VarianceOH Spending VarianceRaw Material InventoryVOH Efficiency VarianceVolume VarianceWages PayableWork in Process Inventory
Accounts PayableCost of Good SoldLabor Efficiency VarianceLabor Rate VarianceMaterial Price VarianceMaterial Quantity VarianceOH Spending VarianceRaw Material InventoryVOH Efficiency VarianceVolume VarianceWages PayableWork in Process Inventory
Accounts PayableCost of Good SoldLabor Efficiency VarianceLabor Rate VarianceMaterial Price VarianceMaterial Quantity VarianceOH Spending VarianceRaw Material InventoryVOH Efficiency VarianceVolume VarianceWages PayableWork in Process Inventory
To record material quantity variance
Accounts PayableCost of Good SoldLabor Efficiency VarianceLabor Rate VarianceMaterial Price VarianceMaterial Quantity VarianceOH Spending VarianceRaw Material InventoryVOH Efficiency VarianceVolume VarianceWages PayableWork in Process Inventory
Accounts PayableCost of Good SoldLabor Efficiency VarianceLabor Rate VarianceMaterial Price VarianceMaterial Quantity VarianceOH Spending VarianceRaw Material InventoryVOH Efficiency VarianceVolume VarianceWages PayableWork in Process Inventory
Accounts PayableCost of Good SoldLabor Efficiency VarianceLabor Rate VarianceMaterial Price VarianceMaterial Quantity VarianceOH Spending VarianceRaw Material InventoryVOH Efficiency VarianceVolume VarianceWages PayableWork in Process Inventory
Accounts PayableCost of Good SoldLabor Efficiency VarianceLabor Rate VarianceMaterial Price VarianceMaterial Quantity VarianceOH Spending VarianceRaw Material InventoryVOH Efficiency VarianceVolume VarianceWages PayableWork in Process Inventory
To record labor variances

Please answer all parts of the question.

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Answer 1

a.

Material purchase price variance = (Actual price - Standard price) * Actual quantity

Material purchase price variance = ($61,000/20,000 - $3) * 20,000

Material purchase price variance = ($3.05 - 3) * 20,000 = $1,000 Unfavorable

Material quantity variance = (Standard quantity - Actual quantity) * Standard price

Standard quantity = 3,900 * 4.8 = 18,720

Material quantity variance = (18,720 - 18,350) * $3 = $1,110 Favorable

b.

Labor rate variance = (Actual rate - Standard rate) * Actual hours

Labor rate variance = ($9.02 - $9) * 1,290 = $26 Unfavorable

Labor efficiency variance = (Standard hours - Actual hours) * Standard rate

Standard hours = 3,900 * 20 / 60 = 1,300 hours

Labor efficiency variance = (1,300 - 1,290) * $9 = $90 Favorable

Total labor variance = $64 Favorable

c.

	General Journal	Debit	Credit
1	Raw material inventory (20,000 * $3)	$60,000
	Material price variance	1,000
	Accounts payable		$61,000
2	Work in process inventory (18,720*$3)	$56,160
	Material quantity variance		$1,110
	Raw material inventory (18,350*$3)		55,050
3	Work in process inventory (1,300*$9)	$11,700
	Labor rate variance	26
	Labor efficiency variance		$90
	Wages payable (1,290*$9.02)		11,636