Just Right Inc. produces jeans. The following standards have been established — Direct materials yards denim — labor hours

Just Right Inc. produces jeans. The following standards have been established:

Direct materials (4 yards of denim @ $1.20) ...................................... $ 4.80

Direct labor (1.5 hours @ $9) .............................................................. $13.50

Standard prime cost ........................................................................... $18.30

During the year 25,000 pairs of jeans were produced. 150,000 yards of denim were purchased and used at $1.23 per yard. Actual direct labor hours were 36,800 at $9.25 per hour.

Required:

A. Compute the materials variances and indicate if they are favorable or unfavorable.

B. Compute the labor variances and indicate if they are favorable or unfavorable.

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C.
Materials	180,000
Materials Price Variance	4,500
Accounts Payable		184,500
Work in Process	120,000
Materials Usage Variance	60,000
Materials		180,000
Work in Process	337,500
Labor Rate Variance	9,200
Labor Efficiency Variance		6,300
Accrued Payroll		340,400
Cost of Goods Sold	73,700
Materials Price Variance		4,500
Materials Usage Variance		60,000
Labor Rate Variance		9,200
Labor Efficiency Variance	6,300
Cost of Goods Sold		6,300

A.
MPV = (AP - SP) x AQ
($1.23 - $1.20) x 150,000 = $4,500 U
MUV = (AQ - SQ) x SP
(150,000 - 100,000) x $1.20 = $60,000 U
B.
LRV = (AR- SR) x AH
($9.25 - $9.00) x 36,800 = $9,200 U
LEV = (AH - SH) x SR
(36,800 - 37,500) x $9 = $6,300 F

Just Right Inc. produces jeans. The following standards have been established — Direct materials yards denim — labor hours

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SOLUTION