Atlantic Manufacturing Company uses standard costing methodology in their journal entries and accounts. Standards for direct labor are as follows: Actual direct labor for the month: 1,200 hours for a total cost of $24,000
Planned production for the month: 3,000 units
The journal entry to record the payment of direct labor wages would be to:

Question

Atlantic Manufacturing Company uses standard costing methodology in their journal entries and accounts. Standards for direct labor are as follows:  Actual direct labor for the month: 1,200 hours for a total cost of $24,000
Planned production for the month: 3,000 units
The journal entry to record the payment of direct labor wages would be to:

Quizplus · Accepted Answer

With standard costing methodology, the actual cost of direct labor is compared to the standard cost for direct labor to determine if there is a variance. The debit to Manufacturing wages should be for the standard cost of direct labor, which is $21,600 (1,200 hours x $18 standard rate). The credit to Wages payable should be for the actual cost of direct labor, which is $24,000. The difference between the standard cost and actual cost is the unfavorable labor price variance of $2,400, which should be debited to the Labor price variance account. Therefore, the journal entry would be to debit Manufacturing wages $21,600, credit Wages payable $24,000, and debit Labor price variance $2,400. Choice D is the correct answer.

Atlantic Manufacturing Company Uses Standard Costing Methodology in Their Journal