Question

The Perfect Tool Company (South America Division) produced 80,000 saw blades during the year. It took 1.5 hours of labor per blade at a rate of $8.50 per hour. However, its standard labor rate is $8.00. Its labor efficiency variance was an unfavorable $40,000. What is the journal entry to record both labor variances?

Answer 1

The question is about calculating and recording the labor variances for a manufacturing company. The labor price variance is an unfavorable $60,000, and together with the given labor efficiency variance of $40,000 unfavorable, the total unfavorable variance is $100,000.

Step-by-step explanation:

The student is asking for assistance with calculating the labor variances and recording the necessary journal entries for a manufacturing company. Since the labor efficiency variance was given as an unfavorable $40,000, we can determine that the actual labor used was higher than the standard labor expected.

To calculate the labor price variance, we take the difference between the actual rate and the standard rate and multiply it by the hours worked. Since the actual rate is $8.50 and the standard rate is $8.00, and it took 120,000 hours (80,000 blades * 1.5 hours/blade) of labor, the labor price variance is:

(Actual Rate - Standard Rate) x Actual Hours = ($8.50 - $8.00) x 120,000 hours = $0.50 x 120,000 = $60,000 unfavorable

For the journal entry:

• Debit Labor Efficiency Variance for $40,000
• Debit Labor Price Variance for $60,000
• Credit Wages Payable for the total variance of $100,000.

Answer 2

Answer: The answer is direct Labour price variance unfavourable $40,000

Step-by-step explanation:

To calculate direct Labour price variance, we use the formula

(Standard Rate - Actual Rate ) × Actual Quantity

Standard Rate = $8.00, Actual Rate = $8.50, Actual Quantity = 80,000

(8.00 - 8.50) × 80,000

= -0.5 × 80,000

= - 40,000

The direct Labour price variance is $40,000 unfavourable

The journal entry will be

$ $

Dr. Cr

Direct Labour price variance 40,000 unfavourable

Direct Labour efficiency variance. 40,000 unfavourable

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Total. 40,000. 40,000

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