Office Magic Ltd manufactures ergonomic office equipment. The standard cost for material and labour is $190 per unit. This includes 8 kilograms of direct material at a standard cost of $5 per kilogram, and 6 hours of direct labour at $25.00 per hour. The following data relate to November:
Work in process inventory, 1 November: none.
Work in process inventory, 30 November: 800 units (75 per cent complete as to labour; material is issued at the beginning of processing).
Units completed: 5600 units.
Purchase of materials 50 000 kilograms for $249 250.
Total actual labour costs: $917 000.
Direct material quantity variance: $1500 unfavourable.
Required:
1. Calculate the following amounts. Indicate whether each variance is favourable or unfavourable.
(a) Direct labour rate variance for November.
(b) Direct labour efficiency variance for November.
(c) Actual kilograms of material used in the production process during November.
(d) Actual price paid per kilogram of direct material in November.
(e) Total amounts of direct material and direct labour transferred to Finished Goods Inventory during November.
(f) The total amount of direct material and direct labour cost in the ending balance of Work in Process Inventory at the end of November.
2. Prepare journal entries to record the following:
(a) Purchase for raw material.
(b) Adding direct material to work in process inventory.
(c) Adding direct labour to work in process inventory.
(d) Recording of variance?
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