Question

When a journal entry is made in a standard cost system to record the liability for direct manufacturing labor costs, the difference between the debits to the work in process accounts and the credits to the payroll payable is:___________a. only the price variance.b. only the efficiency variance.c. the difference between the actual costs incurred and the budgeted costs.d. the price and the efficiency labor variances.

Answer 1

When a journal entry is made in a standard cost system to record the liability for direct manufacturing labor costs, the difference between the debits to the work in process accounts and the credits to the payroll payable is:___________

the price and the efficiency labor variances.

Step-by-step explanation:

The total direct labor cost variance is the difference between the standard cost for actual production and the actual cost in production. It is divided into two main variances. They are the Labor Rate (price) Variance and the Labor Efficiency Variance. Using standard cost system, the cost debited to the work in process account is based on standard cost, while the corresponding credit entry in the payroll payable is based on the actual cost. The labor variance is, therefore, the price and efficiency labor variances.