If the direct labor rate variance is $500 favorable, and the direct labor efficiency variance is $250 unfavorable, the journal entry will include a

 Learning Objective 08-P6: Appendix 8A—Prepare journal entries for standard costs and account for price and quantity variances.

When a company records standard costs in its accounts, the standard costs of direct materials, direct labor, and overhead are debited to the Work in Process Inventory account. Based on an analysis of the material, labor, and overhead costs, each quantity variance, price variance, volume variance, and controllable variance is recorded in a separate account. At period-end, if the variances are not material, they are debited (if unfavorable) or credited (if favorable) to the Cost of Goods Sold account.

 If the direct labor rate variance is $500 favorable, and the direct labor efficiency variance is $250 unfavorable, the journal entry will include a: (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
 

Explanation
Knowledge Check 01
 
A favorable variance is credited and an unfavorable variance is debited. If the direct labor rate variance is $500 favorable, and the direct labor efficiency variance is $250 unfavorable, the journal entry will include a debit to work in process inventory (standard cost), debit to direct labor efficiency variance, credit to factory wages payable (actual cost), and a credit to direct labor rate variance.

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