Question:
(DM & DL variances) Green Tee produces 100 percent cotton t-shirts, with the following standard direct material and labor quantities and costs:
|
Direct material
|
2.0 yards X $3.00
|
|
Direct labor
|
0.7 hour X $7.50
|
Actual September production and costs for the company to produce 10,000 t-shirts were as follows:
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Quantity
|
Cost
|
|
Direct material
|
|
|
|
Purchased
|
30,000 yards
|
$89,700
|
|
Requisitioned into production
|
20,120 yards
|
|
|
Direct labor
|
7,940 hours
|
58,756
|
a. What is the standard quantity of material and the standard labor time for September's production?
b. Compute the direct material and direct labor variances.
c. How might the sales and production managers explain the direct material variances?
d. How might the production and human resources managers explain the direct labor variances?
e. Record the year-end adjusting entry to close the material and labor variances.