Naches Co Assigned Direct Labor Cost to Its Products in May

question 159

Essay

Naches Co. assigned direct labor cost to its products in May for 1,300 standard hours of direct labor at the standard $8 per hour rate. The direct labor rate variance for the month was $200 favorable and the direct labor efficiency variance was $150 favorable. Prepare the journal entry to charge Work in Process Inventory for the standard labor cost of the goods manufactured in May and to record the direct labor variances. Assuming that the direct labor variances are immaterial, prepare the journal entry that Naches would make to close the variance accounts.

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Definitions:

Total Costs

The combined amount of all the costs associated with the production of goods or services, including both fixed and variable costs.

Output

The quantity of products or services produced by a company, a sector, or an economy within a specified period.

Profit

The profit made when the income from a business operation surpasses the expenditures, costs, and taxes required to maintain that operation.

Zero Marginal Cost

Zero marginal cost describes a situation where producing one additional unit of a good or service does not increase the total cost of production.