Exercise 12B-2

1) For direct materials: Compute the direct materials price and quantity variances

Actual Quantity xActual Price________

Actual Quantity xStandard Price_______

Standard Quantity xStandard Price____

10,000 x 13.8 = $138000 10,000 x 14 = $140000

3000 x 2.5 x 14 = $105000

Price variance $2000 favourable

Quantity variance $7000 unfavourable

8000 x 14 = $112000

Exercise 12B-2

1) For direct materials: Prepare Journal entries to record the purchase of materials and the use of materials in production.

Debit Credit

Raw Materials 140,000

Direct Materials Price Variance

2000

Account Payable 138000

Debit Credit

Work In progress 105000

Direct Materials Quantity Variance

7000

Raw Material 112000

To record the purchase of materials

To record use of materials

Exercise 12B-2

2) For direct labour: Compute the direct labour rate and efficiency variances

Actual Hours xActual Rate________

Actual Hours xStandard Rate_______

Standard Hours xStandard Rate____

$43000 5000 x 8 = $40,000

3000 x 1.6 x 8 = $38,400

Rate Variance $3000 unfavourable

Efficiency variance $1600 unfavourable

Exercise 12B-2

2) For direct labour: Prepare a journal entry to record the incurrence of direct labour cost for the month

Debit Credit

Work In Process 38,400

Direct labour rate variance 3,000

Direct labour efficiency variance

1,600

Wages Payable 43,000

To record the incurrence of direct labour cost

Exercise 12B-2

3) Post the entries you have prepared to the following T-accounts

Raw materials

140,000 112,000

Balance: 28,000

Work in Process

105,000

38,400

Account Payable

138,000Wages Payable

43,000

Material Price Variance

2,000Material Quantity Variance

7,000

Labour Rate Variance

3,000Labour Efficiency Variance

1,600