Frontera Company’s output for the current period results in a $20,000 unfavorable direct labor rate variance and a $10,000 unfavorable direct labor efficiency variance. Production for the current period was assigned a $400,000 standard direct labor cost. What is the actual total direct labor cost for the current period?
The actual total direct labor cost for the current period is $430,000.
Direct labor denotes the labor force directly associated with the production department of a business concern. The cost spent by a business on its production department’s labor force is considered a direct cost in the books.
|Standard direct labor cost||400,000|
|Add: Unfavorable direct labor rate variance||20,000|
|Add: Unfavorable direct labor efficiency variance||10,000|
|Actual total direct labor cost||$430,000|
Tempo Company’s fixed budget (based on sales of 7,000 units) for the first quarter of calendar year 2017 reveals the following. Prepare flexible budgets following the format of Exhibit 21.3 that show variable costs per unit, fixed costs, and three different flexible budgets for sales volumes of 6,000, 7,000, and 8,000 units.
Sales (7,000 units) $2,800,000
Cost of goods sold
Direct materials $280,000
Direct labor 490,000
Production supplies 175,000
Plant manager salary 65,000 1,010,000
Gross profit 1,790,000
Sales commissions 140,000
Advertising 125,000 419,000
Administrative salaries 85,000
Depreciation- Office equip. 35,000
Office rent 36,000 176,000
Income from operations $1,195,000
Resset Co. provides the following results of April’s operations: F indicates favorable and U indicates unfavorable. Applying the management by exception approach, which variances are of greatest concern? Why?
Direct materials price variance
Direct materials quantity variance
Direct labor rate variance
Direct labor efficiency variance
Controllable overhead variance
Fixed overhead volume variance
Refer to Exercise 21-13. Hart Company records standard costs in its accounts and its materials variances in separate accounts when it assigns materials costs to the Work in Process Inventory account.
1. Show the journal entry that both charges the direct materials costs to the Work in Process Inventory account and records the materials variances in their proper accounts.
2. Assume that Hart’s materials variances are the only variances accumulated in the accounting period and that they are immaterial. Prepare the adjusting journal entry to close the variance accounts at period-end.
3. Identify the variance that should be investigated according to the management by exception concept. Explain.
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