Chapter 9, Problem 28P

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. 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.