   Chapter 23, Problem 23.22EX

Chapter
Section
Textbook Problem

Recording standards in accounts The Assembly Department produced 5,000 units of product during March. Each unit required 2.20 standard direct labor hours. There were 11,500 actual hours used in the Assembly Department during March at an actual rate of $17.60 per hour. The standard direct labor rate is$18.00 per hour. Assuming that direct labor for a month is paid on the fifth day of the following month, journalize the direct labor in the Assembly Department on March 31.

To determine

Direct labor time variance:

Direct labor time variance is the difference between actual direct labor hours, and the standard direct labor hours multiplied by standard rate per hour. When the actual direct labor hours exceeds the standard direct labor hours, the variance is unfavorable. Similarly, when the actual direct labor hour is less than the standard direct labor hour, the variance is favorable.

Direct labor rate variance:

Direct labor rate variance is the difference between actual rate per hours, and the standard rate per hour multiplied by actual hour. When the actual rate per hours exceeds the standard rate per hours, the variance is unfavorable. Similarly, when the actual rate per hour is less than the standard rate per hour, the variance is favorable.

To Journalize: The direct labor in the assembly department on March 31.

Explanation

The direct labor in the assembly department on March 31 is as follows:

 Date Particulars  March. 31 Work in process                   (1) 198,000 Direct labor time variance    (2) 9,000 Direct labor rate variance (3) 4,600 Wages payable                 (4) 202,400

Table (1)

Working notes:

Determine the amount of work in process:

Workin progress=[Number of units produced × Standard directlabor hours × Standard direct labor rate]= 5,000 units × 2.20 hrs. × $18.00=$198,000 (1)

Determine the direct labor rate variance:

Direct labor rate variance = [(Actual rate per hourStandard rate per hour)× Actual hours]=[(\$17

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