Howard Company Has Established the Following Standards

Essay

Howard Company has established the following standards:
Direct materials: 2.0 pounds at $4.10
Direct labor: 1.5 hours at $7 per hour
Additional information was extracted from the accounting records:
Actual production: 32,000 completed units
Direct materials purchased: 70,000 pounds at $3.82,or $267,400
Direct materials consumed: 65,000 pounds
Actual labor incurred: 51,000 hours at $6.30,or $321,300
Direct-labor rate variance: $35,700 favorable
Direct-labor efficiency variance: $21,000 unfavorable
Assume that the company computes variances at the earliest point in time.
Required:
Prepare journal entries to record the:
A.Purchase of direct materials.
B.Usage of direct materials.
C.Incurrence of direct labor costs.

In "C" the Direct-Labor Efficiency Variance should be 21,000 and the Direct-Labor Rate Variance should be 35,700.