Material price variance = (Standard price per gram - Actual price per gram) * Actual quantity of material used = (P5 - P6) * 14000 = P14,000 (Unfavourable) Material efficiency variance = (Standard quantity of materials - Actual material quantity used) * Standard price per gram = (12000 - 14000) * 5 = P10,000 (Unfavourable) Total materials cost variance = Materials price variance + Materials efficiency variance = (P14,000) + (P10,000) = P24,000 (Unfavourable) For Direct labour, Standard labour hours allowed for actual production = Actual units produced * Standard hours per unit = 2000 units * 1.8 hours = 3600 hours Direct labour rate variance = (Standard labour rate - Actual labour rate) * Actual labour hours used = (P100 - P97.5) * 4000 = P10,000 (Favourable) Direct labour efficiency variance = (Standard labour hours - Actual labour hours) * Standard labour rate = (3600 - 4000) * 100 = P40,000 (Unfavourable) Total direct labour cost variance = Direct labour rate variance + Direct labour efficiency variance = P10,000 - (P40,000) = P30,000 (Unfavourable) For Variable manufacturing overheads: Actual variable manufacturing overhead cost per hour = Actual variable manufacturing overhead costs/ Actual direct labour hours = P208,000/P4000 = P52 per hour Variable manufacturing overhead rate variance = (Standard variable manufacturing overhead rate - Actual variable manufacturing overhead rate) * Actual labour hours = (P50 - P52) * 4000 = P8000 (Unfavourable) Variable manufacturing overhead efficiency variance = (Standard labour hours - Actual labour hours) * Standard variable manufacturing overhead rate per hour = (3600 - 4000) * 50 = P20,000 (Unfavourable) Total variable manufacturing overheads variance = Variable manufacturing overhead rate variance + Variable manufacturing overhead efficiency variance = (P8000) + (P20,000) = P28,000 (Unfavourable)   Requirement  Make the Journal Entries to record the following variances: Direct materials variance  Direct labor variance  Variable manufacturing overhead variances

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Material price variance = (Standard price per gram - Actual price per gram) * Actual quantity of material used

= (P5 - P6) * 14000 = P14,000 (Unfavourable)

Material efficiency variance = (Standard quantity of materials - Actual material quantity used) * Standard price per gram

= (12000 - 14000) * 5 = P10,000 (Unfavourable)

Total materials cost variance = Materials price variance + Materials efficiency variance

= (P14,000) + (P10,000) = P24,000 (Unfavourable)

For Direct labour,

Standard labour hours allowed for actual production = Actual units produced * Standard hours per unit

= 2000 units * 1.8 hours = 3600 hours

Direct labour rate variance = (Standard labour rate - Actual labour rate) * Actual labour hours used

= (P100 - P97.5) * 4000 = P10,000 (Favourable)

Direct labour efficiency variance = (Standard labour hours - Actual labour hours) * Standard labour rate

= (3600 - 4000) * 100 = P40,000 (Unfavourable)

Total direct labour cost variance = Direct labour rate variance + Direct labour efficiency variance

= P10,000 - (P40,000) = P30,000 (Unfavourable)

For Variable manufacturing overheads:

Actual variable manufacturing overhead cost per hour = Actual variable manufacturing overhead costs/ Actual direct labour hours

= P208,000/P4000 = P52 per hour

Variable manufacturing overhead rate variance = (Standard variable manufacturing overhead rate - Actual variable manufacturing overhead rate) * Actual labour hours

= (P50 - P52) * 4000 = P8000 (Unfavourable)

Variable manufacturing overhead efficiency variance = (Standard labour hours - Actual labour hours) * Standard variable manufacturing overhead rate per hour

= (3600 - 4000) * 50 = P20,000 (Unfavourable)

Total variable manufacturing overheads variance = Variable manufacturing overhead rate variance + Variable manufacturing overhead efficiency variance

= (P8000) + (P20,000) = P28,000 (Unfavourable)

 

Requirement 

Make the Journal Entries to record the following variances:

    1. Direct materials variance 
    2. Direct labor variance 
    3. Variable manufacturing overhead variances 
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