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EZ Tees Corporation produces T-shirts. The company uses a standard costing system and has set the following standards for direct materials and direct labor (for one shirt): $4.20 Fabric (1.5 yds. @ $2.80) Direct labor (1.1 hr. @ $20) Total prime cost 22.00 $26.20 During the year, EZ Tees produced 9,900 T-shirts. The actual fabric purchased was 14,750 yards at $2.74 per yard. There were no beginning or ending inventories of fabric. Actual direct labor was 11,010 hours at $19.60 per hour. Required: 1. Compute the costs of fabric and direct labor that should have been incurred for the production of 9,900 T-shirts. Direct materials 41,580 Direct labor 217,800 2. Compute the total budget variances for direct materials and direct labor. Direct materials 40,415 X Favorable Direct labor 2,004 Favorable 3. Break down the total budget variance for direct materials into a price variance and a usage variance. Materials Price Variance 1,165 X Favorable Materials Usage Variance 280 Favorable Prepare the journal entries associated with these variances. If an amount box does not require an entry, leave it blank. Price Variance Materials 41,300 Direct Materials Price Variance 1,180 X Accounts Payable 40,120 X Usage Variance Feedback 4. Break down the total budget variance for direct labor into a rate variance and an efficiency variance. Labor Rate Variance 8 Labor Efficiency Variance Feedback Prepare the journal entries associated with these variances. If an amount box does not require an entry, leave it blank. Work in Process 217,800 Direct Labor Efficiency Variance 4,404 X Direct Labor Rate Variance 2,400 Wages Payable 215,796

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