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Haversham Corporation produces dress shirts. The company uses a standard costing system and has set the following standards for direct materials and direct labor (for one shirt): During the year, Haversham produced 9,800 shirts. The actual fabric purchased was 14,600 yards at $2.74 per yard. There were no beginning or ending inventories of fabric. Actual direct labor was 10,900 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 9,800 shirts. 2. Compute the total budget variances for direct materials and direct labor. 3. Break down the total budget variance for direct materials into a price variance and a usage variance. Prepare the journal entries associated with these variances. 4. Break down the total budget variance for direct labor into a rate variance and an efficiency variance. Prepare the journal entries associated with these variances.

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

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Chapter
Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 9, Problem 28P
Textbook Problem
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Haversham Corporation produces dress shirts. The company uses a standard costing system and has set the following standards for direct materials and direct labor (for one shirt):

Chapter 9, Problem 28P, Haversham Corporation produces dress shirts. The company uses a standard costing system and has set

During the year, Haversham produced 9,800 shirts. The actual fabric purchased was 14,600 yards at $2.74 per yard. There were no beginning or ending inventories of fabric. Actual direct labor was 10,900 hours at $19.60 per hour.

Required:

  1. 1. Compute the costs of fabric and direct labor that should have been incurred for the production of 9,800 shirts.
  2. 2. Compute the total budget variances for direct materials and direct labor.
  3. 3. Break down the total budget variance for direct materials into a price variance and a usage variance. Prepare the journal entries associated with these variances.
  4. 4. Break down the total budget variance for direct labor into a rate variance and an efficiency variance. Prepare the journal entries associated with these variances.

1.

To determine

Calculate the cost of fabric and direct labor.

Explanation of Solution

Calculate the cost of fabric:

Cost of fabric=(Cost of fabric× Production units )=($4.20×9,800 shirts)=$41,160

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2.

To determine

Calculate the total budget variances for direct materials and direct labor.

3.

To determine

Compute the direct materials price variance and the direct materials usage variance and prepare journal entries related to these variances.

4.

To determine

Calculate the direct labor rate variance and labor efficiency variance and prepare journal entries related to these variances.

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Chapter 9 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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