Question

Direct Materials and Direct Labor Variances

At the beginning of June, Bezco Toy Company budgeted 16,000 toy action figures to be manufactured in June at standard direct materials and direct labor costs as follows:

Direct materials	$16,000
Direct labor	7,680
Total	$23,680

The standard materials price is $0.4 per pound. The standard direct labor rate is $12 per hour. At the end of June, the actual direct materials and direct labor costs were as follows:

Actual direct materials	$15,000
Actual direct labor	7,200
Total	$22,200

There were no direct materials price or direct labor rate variances for June. In addition, assume no changes in the direct materials inventory balances in June. Bezco Toy Company actually produced 14,600 units during June.

Determine the direct materials quantity and direct labor time variances. Round your per unit computations to two decimal places, if required. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Direct materials quantity variance	$
Direct labor time variance	$

Answer 1

Direct materials quantity variance = (standard quantity - Actual quantity ) * standard price

=SQ*SP-AQ*SP

Standard quantity per toy = $16,000/(0.4*16000)

= 2.5 pounds per toy

Standard quantity for 14,600 toys = 14600*2.5 = 36500 pounds

Direct materials quantity variance = (36,500*0.4) - 15000

=14,600-15000

= 400 unfavorable

Direct labor Time variance = (standard time - Actual time)* standard rate

=ST*SR - AT*SR

Standard time per toy =7680/(12*16000)

= 0.04 hr

Standard time for 14,600 toys = 14600*0.04 =584 hours

Direct labor Time variance = 584*12 - 7200

=192 unfavorable