Pri c e and efficiency v arian c es, journal entries. Drogheda Chemical Ltd has set up the


Question Description:

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Pri c e and efficiency v arian c es, journal entries. Drogheda Chemical Ltd has set up the following standards per finished output unit for direct materials and direct manufacturing labour. Direct materials: 10 kg at €3.00 per kg €30.00 Direct manufacturing labour: 0.5 hour at €20.00 per hour €10.00 The number of finished output units budgeted for March 2008 was 10 000; 9810 units were actually produced. Actual results in March 2008 were: Direct materials: 98 073 kg used Direct manufacturing labour: 4900 hours €102 900 Assume that there were no opening stocks of either direct materials or finished units. During the month, materials purchases amounted to 100 000 kg, at a total cost of €310 000. Pric e variance s ar e isolate d upo n pu r chase . Efficienc y variance s ar e isolate d a t th e tim e o f usage. Required 1 Calculate the March 2008 price and efficiency variances of direct materials and direct manufacturing labour. Comment on these variances. 2 Prepare journal entries to record the variances in requirement 1. 3 Why might Drogheda Chemical Ltd calculate materials price variances and materials efficiency variances with reference to different points in time?

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