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13.50 3.00 2.25 Direct Materials, Direct Labor, and Overhead Varlances, Journal Entries Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following standard cost sheet: Direct materials (5 lbs. @ $2.60) $13.00 Direct labor (0.75 hr. @ $18.00) Fixed overhead (0.75 hr. @ $4.00) Variable overhead (0.75 hr. @ $3.00) Standard cost per unit $31.75 Algers computes Its overhead rates using practical volume, which is 54,000 units. The actual results for the year are as follows: a. Units produced: 53,000 b. Direct materials purchased: 275,000 pounds at $2.50 per pound c. Direct materials used: 270,300 pounds d. Direct labor: 40,100 hours at $17.95 per hour e. Fixed overhead: $161,800 f. Variable overhead: $122,100 Required: 1. Compute price and usage variances for direct materials. MPV $ 27,500 Favorable 13,780 Unfavorable MUV 2. Compute the direct labor rate and labor efficiency variances. Labor Rate Variance Labor Efficiency Varlance 2,005 Favorable 6,300 Unfavorable 3. Compute the fixed overhead spending and volume variances. Spending Varlance 200 Favorable Volume Variance 3,000 Unfavorable 4. Compute the variable overhead spending and efficiency variances. Spending Variance 1,800 Unfavorable Unfavorable Efficiency Variance 1,050 Feedback 5. Prepare journal entries for the following: a. The purchase of direct materials b. The issuance of direct materials to production (Work In Process) c. The addition of direct labor to Work In Process d. The addition of overhead to Work in Process e. The incurrence of actual overhead costs If an amount box does not require an entry, leave it blank. a. Materials 714,900X Direct Materials Price Variance Accounts Payable 27,400X 687,500 689,000 b. Work In Process Direct Materials Usage Variance Materials 13,780 702,780 715,500 6,300 c. Work in Process Direct Labor Efficiency Variance Direct Labor Rate Variance Wages Payable 2,005 719,795 d. Work in Process 278,250 Variable Overhead Control 119,250 Fixed Overhead Control 159,000 122,100 e. Variable Overhead Control Fixed Overhead Control Various Accounts 161,800 283,900 Feedback f. Prepare journal entries for the closing out of varlances to Cost of Goods Sold. If ar First, close direct materials and direct labor variances: Direct Materials Price Variance 27,400 x Direct Labor Rate Variance Direct Materials Usage Variance 13,780 Direct Labor Efficiency Variance 6,300 Cost of Goods Sold 9,325 X 2,005 1120E Feedback Second, recognize the overhead variances: If an amount box does not require an entry, leave it blank. Third, close the overhead varlances: Note: Close the variances with a debit balance first. For compound entries, if an amount box does not require an entry, leave it blank