Reference: 21_05
A job was budgeted to require three hours of labor per unit at $8 per hour. The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $198,000.
-The entry to record the labor costs and variances would include a:
A) debit to Goods in Process for $198,000.
B) credit to Factory Payroll for $192,000.
C) debit to Direct Labor Cost Variance for $6,000.
D) credit to Direct Labor Cost Variance for $6,000.
E) credit to Direct Labor Efficiency Variance for $16,000

Question

Quizplus · Accepted Answer

Rate variance: $198,000 - (22,000 hours x $8) = $22,000 unfavorable
Debit to DL rate variance $22,000
Efficiency variance: ($8 x 22,000) - [$8 x (8,000 x 3 hours)] = $16,000 favorable
Credit to DL efficiency variance $16,000
Total labor cost: $198,000
Credit to factory payroll $198,000
Standard labor cost: ($8 x 3 hours) x 8,000 units = $192,000
Debit to GIP $192,000

Reference: 21_05 A Job Was Budgeted to Require Three Hours of Labor