Gramajo Corporation's standard wage rate is $10.10 per direct labor-hour (DLH) and according to the standards, each unit of output requires 3.4 DLHs. In February, 2,400 units were produced, the actual wage rate was $9.40 per DLH, and the actual hours were 7,920 DLHs. In the journal entry to record the incurrence of direct labor costs in February, the Work in Process entry would consist of a:
A)credit of $74,448.
B)debit of $74,448.
C)debit of $82,416.
D)credit of $82,416.

Question

Quizplus · Accepted Answer

To determine the direct labor cost incurred in February, we need to calculate the standard hours (SH) and actual hours (AH) worked:

SH = 2,400 units × 3.4 DLHs per unit = 8,160 DLHs
AH = 7,920 DLHs

We can now calculate the total direct labor cost incurred:

Total DL cost = AH × actual wage rate = 7,920 DLHs × $9.40/DLH = $74,448

To record this cost in the Work in Process account, we need to debit the account for the total direct labor cost incurred:

Work in Process  $ 82,416
   Direct Labor   $ 82,416

Gramajo Corporation's Standard Wage Rate Is $10