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The Perfect Tool Company (South America Division) produced 80,000 saw blades during the year. It took 1.5 hours of labor per blade at a rate of $8.50 per hour. However, its standard labor rate is $8.00. Its labor efficiency variance was an unfavorable $40,000. What is the journal entry to record both labor variances?

Respuesta :

Answer: The answer is direct Labour price variance unfavourable $40,000

Explanation:

To calculate direct Labour price variance, we use the formula

(Standard Rate - Actual Rate ) × Actual Quantity

Standard Rate = $8.00, Actual Rate = $8.50, Actual Quantity = 80,000

(8.00 - 8.50) × 80,000

= -0.5 × 80,000

= - 40,000

The direct Labour price variance is $40,000 unfavourable

The journal entry will be

$ $

Dr. Cr

Direct Labour price variance 40,000 unfavourable

Direct Labour efficiency variance. 40,000 unfavourable

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Total. 40,000. 40,000

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