Price and efficiency variances, journal entries

7.29 Price and efficiency variances, journal entries. The Schuyler Corporation manufactures lamps. It has set up the following standards per finished unit for direct materials and direct manufacturing labor:

Direct materials: 10 lb. at $4.50 per lb.


Direct manufacturing labor: 0.5 hour at $30 per hour


The number of finished units budgeted for January 2017 was 10,000; 9,850 units were actually produced.

Actual results in January 2017 were as follows:

Direct materials: 98,055 lb. used

Direct manufacturing labor: 4,900 hours


Assume that there was no beginning inventory of either direct materials or finished units.

During the month, materials purchased amounted to 100,000 lb., at a total cost of $465,000. Input price variances are isolated upon purchase. Input-efficiency variances are isolated at the time of usage.


  1. Compute the January 2017 price and efficiency variances of direct materials and direct manufacturing labor.
  2. Prepare journal entries to record the variances in requirement 1.
  3. Comment on the January 2017 price and efficiency variances of Schuyler Corporation.
  4. Why might Schuyler calculate direct materials price variances and direct materials efficiency variances with reference to different points in time?


(30 min.) Price and efficiency variances, journal entries.

  1. Direct materials and direct manufacturing labor are analyzed in turn:

Actual Costs


(Actual Input Qty.

× Actual Price)

Actual Input Qty.

× Budgeted Price

Flexible Budget

(Budgeted Input

Qty. Allowed for

Actual Output

× Budgeted Price)



(100,000 × $4.65a)


Purchases Usage

(100,000 × $4.50) (98,055 × $4.50)

$450,000 $441,248

(9,850 × 10 × $4.50)


$15,000 U Price variance

$2,002 F Efficiency variance

Price variance Efficiency variance




(4,900 × $31.5b)


(4,900 × $30)


(9,850 × 0.5 × $30) or

(4,925 × $30)


$7,350 U $750 F

Price variance Efficiency variance

a $465,000 ÷ 100,000 = $4.65

b $154,350 ÷ 4,900 = $31.5

  1. Direct Materials Control 450,000

Direct Materials Price Variance 15,000

Accounts Payable or Cash Control 465,000

Work-in-Process Control 443,250

Direct Materials Control 441,248

Direct Materials Efficiency Variance 2,002

Work-in-Process Control 147,750

Direct Manuf. Labor Price Variance 7,350

Wages Payable Control 154,350

Direct Manuf. Labor Efficiency Variance 750

  1. Some students’ comments will be immersed in conjecture about higher prices for materials, better quality materials, higher grade labor, better efficiency in use of materials, and so forth. A possibility is that approximately the same labor force, paid somewhat more, is taking slightly less time with better materials and causing less waste and spoilage.

A key point in this problem is that all of these efficiency variances are likely to be insignificant. They are so small as to be nearly meaningless. Fluctuations about standards are bound to occur in a random fashion. Practically, from a control viewpoint, a standard is a band or range of acceptable performance rather than a single-figure measure.

  1. The purchasing point is where responsibility for price variances is found most often. The production point is where responsibility for efficiency variances is found most often. The Schuyler Corporation may calculate variances at different points in time to tie in with these different responsibility areas.
Want latest solution of this assignment

Submit Your Assignment Here

AssignmentHippo Features

On Time Delivery

Our motto is deliver assignment on Time. Our Expert writers deliver quality assignments to the students.

Plagiarism Free Work

Get reliable and unique assignments by using our 100% plagiarism-free.

24 X 7 Live Help

Get connected 24*7 with our Live Chat support executives to receive instant solutions for your assignment.

Services For All Subjects

Get Help with all the subjects like: Programming, Accounting, Finance, Engineering, Law and Marketing.

Best Price Guarantee

Get premium service at a pocket-friendly rate at AssignmentHippo


  • Assignment Writing Guide
  • Essay Writing Guide
  • Dissertation Writing Guide
  • Research Paper Writing Guide


  • Accounts
  • Computer Science
  • Economics
  • Engineering

Client Review

I was struggling so hard to complete my marketing assignment on brand development when I decided to finally reach to the experts of this portal. They certainly deliver perfect consistency and the desired format. The content prepared by the experts of this platform was simply amazing. I definitely owe my grades to them.

Tap to Chat
Get instant assignment help