Reference no: EM132963495

Exercise - The production engineering staff and the factory accountant have set the following standards for Marley Ltd:

Direct material Quantity (kgs) 4.00

Price per kg ($) 0.90

Direct labour Quantity (hrs) 0.25

Rate per hour ($) 33.00

Actual material purchases amounted to 240,000 kgs at $0.93 per kg. Actual costs incurred in the production of 50,000 units were as follows:

Direct material 210,000 kgs for $195,300

Direct labour 13,000 hrs for $448,500

Required -

(a) Calculate the direct material and direct labour variances, indicating whether each variance is favourable or unfavourable.

(b) Prepare journal entries to record:

(i) The purchase of direct materials and use of direct materials in production.

(ii) The use of direct labour in production.

(iii) The closing of variances to cost of goods sold.