1. a. The computation of the direct materials price variance is as follows:
= $2,204 ($12.20 - $12.30) x 22,040) Unfavorable
1.b. The computation of the direct materials quantity variance is as follows:
= $27,816 (24,320 - 22,040) x $12.20) Favorable
2. The direct materials variance that Hart will investigate further is the <em>direct materials quantity variance</em>, which is 10.3% ($27,816/$271,092 x 100) of the actual direct materials costs instead of the<em> </em><em>direct materials price variance</em>, which is only 0.8% of the actual direct materials costs.
3. The journal entry to charge direct materials costs to Work in Process Inventory and record and close the materials variances are as follows:
a. Recording the Direct Materials Costs and Variances
Debit Work in Process $296,704 ($12.20 x 8 x 3,040)
Debit Direct Materials Price Variance $2,204
Credit Direct Materials Quantity Variance $27,816
Credit Raw Materials $271,092
- To record the charge of direct materials to work in process based on standard cost.
b. Closing the Direct Materials Variances:
Debit Direct Materials Quantity Variance $27,816
Credit Direct Materials Price Variance $2,204
Credit Cost of Goods Sold $25,612
- To close direct materials variances to the cost of goods sold.
Data and Calculations:
Units of bookshelves produced = 3,040
Feet of board used = 22,040
Cost of board feet of wood = $271,092
Per Unit Standard Actual
Price $12.20 $12.30 ($271,092/22,040)
Board feet 8 7.25 (22,040/3,040)
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