EXERCISE 10B–2 Material and Labor Variances; Journal Entries [LO1, LO2, LO5]

Aspen Products, Inc., began production of a new product on April 1. The company uses a standard cost system and has established the following standards for one unit of the new product:

 

 

 

 

During April, the following activity was recorded regarding the new product:

a.       Purchased 7,000 feet of material at a cost of $5.75 per foot.

b.       Used 6,000 feet of material to produce 1,500 units of the new product.

c.        Worked 725 direct labor-hours on the new product at a cost of $8,120.

Required:

1.       For direct materials:

a.       Compute the direct materials price and quantity 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 journal entries to record the incurrence of direct labor cost for the month.

3.       Post the entries you have prepared to the T-accounts below:

 

 

Accounts Payable

 

 

  

 

 

Materials Price Variance

Wages Payable

 

 

  

 

 

Materials Quantity Variance

Labor Rate Variance

 

 

        

 

 

Work in Process

Labor Efficiency Variance