FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for …
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on t…
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Direct Materials and Direct Labor Variances Berner Company produces a dark chocolate candy bar. Recently, the company adopted the following standards for one bar of the candy: Direct materials (8.2 oz. @ $0.09) Direct labor (0.07 hr. @ $18.00) Standard prime cost Materials Price Variance During the first week of operation, the company experienced the following actual results: a. Bars produced: 78,000. b. Ounces of direct materials purchased: 640,000 ounces at $0.084 per ounce. c. There are no beginning or ending inventories of direct materials. d. Direct labor: 5,510 hours at $18. Required: $0.738 1. Compute price and usage variances for direct materials. 3,840 Labor Efficiency Variance 1.26 $1.998 0 Materials Usage Variance 2. Compute the rate variance and the efficiency variance for direct labor. Labor Rate Variance No Change ✓ 33.6 X 900 Favorable ✔ Unfavorable ✓ Unfavorable ✓
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Transcribed Image Text:Direct Materials and Direct Labor Variances Berner Company produces a dark chocolate candy bar. Recently, the company adopted the following standards for one bar of the candy: Direct materials (8.2 oz. @ $0.09) Direct labor (0.07 hr. @ $18.00) Standard prime cost Materials Price Variance During the first week of operation, the company experienced the following actual results: a. Bars produced: 78,000. b. Ounces of direct materials purchased: 640,000 ounces at $0.084 per ounce. c. There are no beginning or ending inventories of direct materials. d. Direct labor: 5,510 hours at $18. Required: $0.738 1. Compute price and usage variances for direct materials. 3,840 Labor Efficiency Variance 1.26 $1.998 0 Materials Usage Variance 2. Compute the rate variance and the efficiency variance for direct labor. Labor Rate Variance No Change ✓ 33.6 X 900 Favorable ✔ Unfavorable ✓ Unfavorable ✓
3. Prepare the journal entries associated with direct materials and direct labor. If an amount box does not require an entry, leave it blank. If an amount is zero, enter "0". Record purchase of materials Materials Direct Materials Price Variance Accounts Payable Record usage of materials Work in Process Direct Materials Usage Variance Materials ✔ Record labor variances Work in Process Direct Labor Rate Variance Direct Labor Efficiency Variance Wages Payable ✔ 9,216 X 000 0000 3,840 5,376 000 0000 X
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Transcribed Image Text:3. Prepare the journal entries associated with direct materials and direct labor. If an amount box does not require an entry, leave it blank. If an amount is zero, enter "0". Record purchase of materials Materials Direct Materials Price Variance Accounts Payable Record usage of materials Work in Process Direct Materials Usage Variance Materials ✔ Record labor variances Work in Process Direct Labor Rate Variance Direct Labor Efficiency Variance Wages Payable ✔ 9,216 X 000 0000 3,840 5,376 000 0000 X
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