Widman, Inc. makes and sells only one product and uses standard costing. The standard cost sheet for one unit of product includes the following: • Direct materials: 5 grams at $0.35 per gram
• Direct labor: 1 hour at $8 per hour
Last period the company had the following results:
• 5,000 grams of direct materials purchased at $0.40 per gram
• 4,000 grams of direct materials used in production
• 900 units of product were made
• 850 hours of direct labor were used at $8.50 per hour
The journal entry to record the incurrence of direct labor cost last period would include:
A)Work in process $7,200, Debit; labor efficiency variance $400, Credit
B)Work in process $7,200, Debit; labor efficiency variance $400, Debit
C)Work in process $6,800, Debit; labor rate variance $425, Debit
D)Work in process $6,800, Debit; labor rate variance $425, Credit

Question

Quizplus · Accepted Answer

The standard direct labor cost for 850 hours is $8 x 850 = $6,800. The actual direct labor cost is $8.50 x 850 = $7,200. The labor rate variance is $7,200 - $6,800 = $400. The labor efficiency variance is 0 because the actual hours used were equal to the standard hours allowed.