Question

Glacier Bicycle Company manufactures commuter bicycles from recycled materials. The following data for October are available: Quantity of direct labor used 5,000 hrs. Actual rate for direct labor $22.75 per hr. Bicycles completed in October 800 bicycles Standard direct labor per bicycle 6.0 hrs. Standard rate for direct labor $24.00 per hr. a. Determine for October the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Direct Labor Rate Variance $fill in the blank 1 113,750 Direct Labor Time Variance $fill in the blank 3 4,800 Total Direct Labor Cost Variance $fill in the blank 5 b. How much direct labor should be debited to Work in Process

Answer 1

Answer:

A. Direct Labor Rate variance -$6250 Favorable

Direct labor time variance $4800 Unfavorable

Total Direct Labor Cost Variance $-1450 Favorable

B. Dr Work In Process $116,650

Explanation:

A.

Calculation to determine Direct Labor Rate variance using this formula

Direct Labor Rate variance= (actual hours* actual rate)- (actual hours * standard rate)

Let plug in the formula

Direct Labor Rate variance=( 5000 *22.75) - (5000*24)

Direct Labor Rate variance= $113750- 120,000= Direct Labor Rate variance-6250 Favorable

Calculation to determine Direct labor time variance using this formula

Direct labor time variance= (Actual hours* Standard rate)- (Standard hours * Standard rate)

Let plug in the formula

Direct labor time variance= (5000 * 24) -(4800 * 24)

Direct labor time variance= 120,000-115200

Direct labor time variance= 4800 Unfavorable

Calculation to determine Total Direct Labor Cost Variance using this formula

Total Direct Labor Cost Variance= Direct Labor Rate variance + Direct labor time variance

Let plug in the formula

Total Direct Labor Cost Variance= -6250 Favorable + 4800 Unfavorable

Total Direct Labor Cost Variance= -1450 Favorable

b. Preparation of the journal entry to determine How much direct labor should be debited to Work in Process

Dr Work In Process $116,650

Cr Direct Labor Cost Variance $ 1,450

Cr Payroll $ 115,200

Therefore the amount of Direct Labor to be Debited to Work In Process is $116,650