Which of the following entries would correctly record the charging of direct labour costs to Work in Process given an unfavourable labour efficiency variance and a favourable labour rate variance?
A) A debit to Work in Process, and credits to Labour Efficiency Variance, Labour Rate Variance, and Wages Payable.
B) A debit to Work in Process and an equal credit to Wages Payable.
C) Debits to Work in Process and Labour Efficiency Variance, and credits to Labour Rate Variance and Wages Payable.
D) Debits to Work in Process and Labour Rate Variance, and credits to Labour Efficiency Variance and Wages Payable.

Question

Quizplus · Accepted Answer

C is correct because it accounts for both variances affecting the labour costs. The unfavourable labour efficiency variance increases the cost (debit), while the favourable labour rate variance decreases the cost (credit), with the net effect recorded in Work in Process and the actual wages paid credited to Wages Payable.

Which of the Following Entries Would Correctly Record the Charging