Melrose Inc.uses standard costing.Last period,its flexible budget for labor was $144,000.The direct labor rate variance was $5,000 favorable,and the direct labor efficiency variance was $6,000 unfavorable.In the journal entry to record the use of direct labor,the amount credited to wages payable would be:
A)$144,000.
B)$145,000.
C)$150,000.
D)$151,000.

Question

Quizplus · Accepted Answer

The flexible budget for labor was $144,000 but due to the favorable direct labor rate variance of $5,000, the total labor cost is $144,000 - $5,000 = $139,000. However, due to the unfavorable direct labor efficiency variance of $6,000, the actual direct labor cost is $139,000 + $6,000 = $145,000. Therefore, the amount credited to wages payable will be $145,000.