Chemical Inc. has set the following standards for direct materials and direct labor for each 20-pound bag of Weed-Be-Doom: Per Bag Direct materials: 25 pounds XF–2000 @ $0.11/pound$2.75 Direct labor: 0.08 hour @ $30/hour 2.40 The firm manufactured 100,000 bags of Weed-Be-Doom in December and used 2,700,000 pounds of XF–2000 and 8,275 direct labor hours. During the month, the firm purchased 3,000,000 pounds of XF–2000 at $0.090 per pound and incurred a total payroll of $289,625 for direct labor. The firm records purchases at standard cost and therefore recognizes the direct materials price variance at point of purchase. Required: 1. Compute the price and usage variances for direct materials and the rate and efficiency variances for direct labor. 2. Prepare journal entries to record the preceding events.
