DIRECT MATERIALS AND DIRECT LABOR VARIANCES Choco Company produces a popular candy bar called Megusta. The candy is produced in Cost Rica and exported to the United States. Recently, the company adopted the following standards for one 5-ounce bar of the candy:
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Direct materials (5.5 oz. @ $0.06)
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$0.33
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Direct labor (0.05 hr. @ $2.00)
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0.10
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Standard prime cost
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$0.43
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During the first week of operation, the company experienced the following actual results:
a. Bars produced: 150,000.
b. Ounces of direct materials purchased: 855,000 ounces at $0.055.
c. There are no beginning or ending inventories of direct materials.
d. Direct labor: 7,800 hours at $2.25.
Required:
1. Compute price and usage variances for direct materials.
2. Compute the rate variance and the efficiency variance for direct labor.
3. Prepare the journal entries associated with direct materials and direct labor.