Laboda?'s Smart? Shawls, Inc., is a small business that Laboda developed while in college. She began? hand-knitting shawls for her dorm friends to wear while studying. As demand? grew, she hired some workers and began to manage the operation. Laboda's shawls require wool and labor. She experiments with the type of wool that she? uses, and she has great variety in the shawls she produces. Laboda has bimodal turnover in her labor. She has some employees who have been with her for a very long time and others who are new and inexperienced.
Laboda uses standard costing for her shawls. She expects that a typical shawl should take 3 hours to? produce, and the standard wage rate is $ 9.00per hour. An average shawl uses 13 skeins of wool. Laboda shops around for good? deals, and expects to pay $ 3.40 per skein. Laboda uses a? just-in-time inventory? system, as she has clients tell her what type and color of wool they would like her to use.
For the month of? April, Laboda's workers produced 200 shawls using 580 hours and 3,300 skeins of wool. Laboda bought wool for $10,460 (and used the entire? quantity), and incurred labor costs of $ 5,630.
Requirements:
1) Record the journal entries for the variances incurred. ?(Record debits? first, then credits. Exclude explanations from any journal? entries.)
Prepare the journal entry for the direct materials price variance.
2) Discuss logical explanations for the combination of variances that Laboda experienced.