- Aquella Company produces towels for hotels. The followingstandards to produce a large towel have been established:
Direct materials (2.2 kilograms @ $6.30) | $13.86 |
Direct labour (1.5 hour @ $16.60) | $24.90 |
Standard prime cost for each large towel | $38.76 |
During the year, 72 000 kilograms of material were purchased andused for manufacturing 30 000 large towels, with the followingactual prime costs:
Direct materials | $436 000 |
Direct labour | $775 770 (for 44 900 hours) |
Required:
i. Compute the material and labor price and efficiencyvariances. Indicate if the variance is favorable (F) or unfavorable(U).
- Prepare the journal entry for the purchase of rawmaterials.
- Prepare the journal entry for the issuance of rawmaterials.
- Prepare the journal entry for the closing of material variancesto Cost of Goods Sold.
