Question

During June, Danby Company’s material purchases amounted to 6,200 pounds at a price of $7.50 per pound. Actual costs incurred in the production of 2,100 units were as follows:

Direct labor:	$	121,695	($18.30 per hour)
Direct material:	$	33,000	($7.50 per pound)

The standards for one unit of Danby Company’s product are as follows:

Direct Labor:	Direct Material:
Quantity, 3 hours per unit	Quantity, 2 pounds per unit
Rate, $18.20 per hour	Price, $7.20 per pound

Required:

Compute the direct-material price and quantity variances, the direct-material purchase price variance, and the direct-labor rate and efficiency variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)

Direct-material price variance
Direct-material quantity variance
Direct-material purchase price variance
Direct-labor rate variance
Direct-labor efficiency variance

Answer 1

Actual Direct material used=33000/7.5= 4400
Direct-material price variance= 4400*(7.5-7.2)= $1320 Unfavorable
Direct-material quantity variance =7.2*(4400-2100*2)= $1440 Unfavorable
Direct-material purchase price variance= 6200*(7.5-7.2)= $1860 Unfavorable
Actual direct labor hours=121695/18.3= 6650
Direct-labor rate variance =121695-(6650*18.2)= $665 Unfavorable
Direct-labor efficiency variance =18.2*(6650-2100*3)= $6370 Unfavorable