Direct Materials, Direct Labor, and Overhead Variances, Journal Entries

Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following standard cost sheet:

Direct materials (5 lbs. @ $2.60)	$13.00
Direct labor (0.75 hr. @ $18.00)	13.50
Fixed overhead (0.75 hr. @ $4.00)	3.00
Variable overhead (0.75 hr. @ $3.00)	2.25
Standard cost per unit	$31.75

Algers computes its overhead rates using practical volume, which is 54,000 units. The actual results for the year are as follows:

1. Units produced: 53,000
2. Direct materials purchased: 274,000 pounds at $2.50 per pound
3. Direct materials used: 270,300 pounds
4. Direct labor: 40,100 hours at $17.95 per hour
5. Fixed overhead: $161,600
6. Variable overhead: $122,000

Required:

1. Compute price and usage variances for direct materials.

MPV	$fill in the blank 63297df7007805b_1
MUV	$fill in the blank 63297df7007805b_3

2. Compute the direct labor rate and labor efficiency variances.

Labor Rate Variance	$fill in the blank 63297df7007805b_5
Labor Efficiency Variance	$fill in the blank 63297df7007805b_7

3. Compute the fixed overhead spending and volume variances.

Spending Variance	$fill in the blank 63297df7007805b_9
Volume Variance	$fill in the blank 63297df7007805b_11

4. Compute the variable overhead spending and efficiency variances.

Spending Variance	$fill in the blank 63297df7007805b_13
Efficiency Variance	$fill in the blank 63297df7007805b_15

5. Prepare journal entries for the following:

1. The purchase of direct materials
2. The issuance of direct materials to production (Work in Process)
3. The addition of direct labor to Work in Process
4. The addition of overhead to Work in Process
5. The incurrence of actual overhead costs

If an amount box does not require an entry, leave it blank.

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b.		fill in the blank 720ecafd9f8407e_11	fill in the blank 720ecafd9f8407e_12
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c.		fill in the blank 720ecafd9f8407e_20	fill in the blank 720ecafd9f8407e_21
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d.		fill in the blank 720ecafd9f8407e_32	fill in the blank 720ecafd9f8407e_33
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e.		fill in the blank 720ecafd9f8407e_41	fill in the blank 720ecafd9f8407e_42
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		fill in the blank 720ecafd9f8407e_47	fill in the blank 720ecafd9f8407e_48

f. Prepare journal entries for the closing out of variances to Cost of Goods Sold. If an amount box does not require an entry, leave it blank.

First, close direct materials and direct labor variances:

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		fill in the blank ae96a9fcafd6fbe_5	fill in the blank ae96a9fcafd6fbe_6
		fill in the blank ae96a9fcafd6fbe_8	fill in the blank ae96a9fcafd6fbe_9
		fill in the blank ae96a9fcafd6fbe_11	fill in the blank ae96a9fcafd6fbe_12
		fill in the blank ae96a9fcafd6fbe_14	fill in the blank ae96a9fcafd6fbe_15

Second, recognize the overhead variances: If an amount box does not require an entry, leave it blank.

		fill in the blank 612416f94053f9e_2	fill in the blank 612416f94053f9e_3
		fill in the blank 612416f94053f9e_5	fill in the blank 612416f94053f9e_6
		fill in the blank 612416f94053f9e_8	fill in the blank 612416f94053f9e_9
		fill in the blank 612416f94053f9e_11	fill in the blank 612416f94053f9e_12
		fill in the blank 612416f94053f9e_14	fill in the blank 612416f94053f9e_15
		fill in the blank 612416f94053f9e_17	fill in the blank 612416f94053f9e_18

Third, close the overhead variances: Note: Close the variances with a debit balance first. For compound entries, if an amount box does not require an entry, leave it blank.

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		fill in the blank a97616fd5038fce_8	fill in the blank a97616fd5038fce_9
		fill in the blank a97616fd5038fce_11	fill in the blank a97616fd5038fce_12
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