Eagan Corporation manufactures one product. The company uses a standard cost system in which inventories are recorded at their standard costs. The standard cost card for the company's only product is as follows:?InputsStandard Quantity or HoursStandard Price or RateStandard Cost?Direct materials1.0gallons$6.00per gallon$6.00?Direct labor0.50hours$19.50per hour9.75?Fixed manufacturing overhead0.50hours$3.00per hour1.50?Total standard cost per unit????$17.25During the year, direct labor workers (who were paid in cash) worked 11,250 hours at an average cost of $19.70 per hour on 22,300 units. These units were started and completed during the year.Required:Completely record the direct labor costs, along with any direct labor variances, in the below worksheet. Because of

Question

the width of the worksheet, it is in two parts. In your text, these two parts would be joined side-by-side to make one very wide worksheet. The beginning balances have been provided for each of the accounts, including the Property, Plant, and Equipment (net) account which is abbreviated as PP&E (net).??CashRaw MaterialsWork in ProcessFinished GoodsPP&E (net)=?1/1$1,100,000 $43,800 $0 $87,975 $628,300 =???????=???????=??Materials Price VarianceMaterials Quantity VarianceLabor Rate VarianceLabor Efficiency VarianceFOH Budget VarianceFOH Volume VarianceRetained Earnings?1/1$0$0$0$0$0$0$1,860,075 ??????????????????

What will be an ideal response?

Answer 1

Labor rate variance = AH × (AR ? SR)
= 11,250 hours × ($19.70 per hour ? $19.50 per hour)
= 11,250 hours × ($0.20 per hour)
= $2,250 U

Labor efficiency variance:
SH = Actual output × Standard quantity = 22,300 units × 0.50 hours per unit = 11,150 hours
Labor efficiency variance = (AH ? SH) × SR
= (11,250 hours ? 11,150 hours) × $19.50 per hour
= (100 hours) × $19.50 per hour
= $1,950 U