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Direct Materials, Direct Labor, and Overhead Variances, Journal Entries Rand Company produces dry fertilizer. At the beginning of the year, Rand had the following standard cost sheet: $10.80 Direct materials (8 lbs. @ $1.35) Direct labor (0.15 hr. @ $18.00) 2.70 Fixed overhead (0.20 hr. @ $3.00) 0.60 Variable overhead (0.20 hr. @ $1.70) 0.34 Standard cost per unit $14.44 Overhead rates are computed using practical volume, which is 51,000 units. The actual results for the year are as follows: a. Units produced: 53,000 b. Direct materials purchased: 408,000 pounds at $1.32 per pound c. Direct materials used: 406,800 pounds d. Direct labor: 10,500 hours at $17.95 per hour e. Fixed overhead: $36,570 f. Variable overhead: $18,000 Required: 1. Compute price and usage variances for direct materials. MPV $ 12,240 Unfavorable MUV 23,220 Favorable 2. Compute the direct labor rate and labor efficiency variances. Labor Rate Variance 525 Favorable Labor Efficiency Variance 45,900 Unfavorable 3. Compute the fixed overhead spending and volume variances. Spending Variance 5,970 Unfavorable Volume Variance 1,200 Favorable 4. Compute the variable overhead spending and efficiency variances. Spending Variance $ 150 Unfavorable Efficiency Variance $ Unfavorable 5. Prepare journal entries for the following: a. The purchase of direct materials b. The issuance of direct materials to production (Work in Process) c. The addition of direct labor to Work in Process d. The addition of overhead to Work in Process e. The incurrence of actual overhead costs If an amount box does not require an entry, leave it blank. a. Materials Direct Materials Price Variance Accounts Payable 111 110 111 111 b. Work in Process Direct Materials Usage Variance Materials C. Work in Process Direct Labor Efficiency Variance Direct Labor Rate Variance Wages Payable d. Work in Process Variable Overhead Control d. Work in Process Variable Overhead Control Fixed Overhead Control e. Variable Overhead Control Fixed Overhead Control Various Accounts 1. Prepare journal entries for the closing out of variances to cost of Goods Sold. Post amounts from highest to lowest. If an amount box does not require an entry, leave it blank. First, close direct materials and direct labor variances: Cost of Goods Sold Direct Materials Price Variance X Direct Materials Usage Variance YX Direct Labor Efficiency Variance 101 Cost of Goods Sold X Feedback Check My Work 5. f. The variances are closed to Cost of Goods Sold. Then FOH and VoH are recognized. Last, the Control variances are closed to COGS. Second, recognize the overhead variances: Post amounts from highest to lowest. If an amount box does not require an entry, leave it blank. Fixed Overhead Volume Variance I Fixed Overhead Spending Variance Variable Overhead Efficiency Variance Fixed Overhead Control Fixed Overhead Spending Variance Variable Overhead Control Feedback Check My Work Partially correct Third, close the overhead variances: Post amounts from highest to lowest. If an amount box does not require an entry, leave it blank. Cost of Goods Sold Variable Overhead Efficiency Variance Variable Overhead Spending Variance bl) Fixed Overhead Volume Variance Fixed Overhead Spending Variance

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