Chapter 10, Problem 49C

European Styles, Inc. manufactures women’s blouses of one quality, which are produced in lots to fill each special order. Its customers are department stores in various cities. European Styles sews the particular stores’ labels on the blouses. During November, the company worked on three orders, for which the month’s job-cost records disclose the following data.

The following additional information is available:

1. 1. The firm purchased 95,000 yards of material during November at a cost of $106,400.
2. 2. Direct labor during November amounted to $165,000. According to payroll records, production employees were paid $15.00 per hour.
3. 3. There was no work in process on November 1. During November, lots 22 and 23 were completed. All material was issued for lot 24, which was 80 percent completed as to direct labor.
4. 4. The standard costs for a box of six blouses are as follows:

Required:

1. 1. Prepare a schedule computing the standard cost of lots 22, 23, and 24 for November.
2. 2. Prepare a schedule showing, for each lot produced during November:
   1. a.      Direct-material purchase price variance.
   2. b.      Direct-material quantity variance.
   3. c.       Direct-labor efficiency variance.
   4. d.      Direct-labor rate variance.

Indicate whether each variance is favorable or unfavorable.

1. 3. Prepare journal entries to record each of the following events.
   • Purchase of material.
   • Incurrence of direct-labor cost.
   • Addition of direct-material and direct-labor cost to Work-in-Process Inventory.
   • Recording of direct-material and direct-labor variances.