Question

3.

E9-5 Calculating Direct Materials and Direct Labor Variances [LO 9-3, 9-4]

Crystal Charm Company makes handcrafted silver charms that attach to jewelry such as a necklace or bracelet. Each charm is adorned with two crystals of various colors. Standard costs follow:

	Standard Quantity			Standard (Rate)			Standard Unit Cost
Silver	0.50	oz.		$	22.00	per oz.		$	11.00
Crystals	2.00			$	0.35	per crystal			0.70
Direct labor	1.50	hrs.		$	12.00	per hr.			18.00

During the month of January, Crystal Charm made 1,650 charms. The company used 785 ounces of silver (total cost of $18,055) and 3,350 crystals (total cost of $1,105.50), and paid for 2,625 actual direct labor hours (cost of $30,187.50).

Required:
1. Calculate Crystal Charm’s direct materials variances for silver and crystals for the month of January. (Round your intermediate calculations and final answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)



2. Calculate Crystal Charm’s direct labor variances for the month of January. (Round your intermediate calculations and final answers to 2 decimal places.Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Answer 1

1. Calculate Crystal Charm’s direct materials variances for silver and crystals for the month of January.

Silver :

Material price variance = (22*785-18055) = 785 U

Material quantity variance = (1650*.50-785)*22 = 880 F

Crystals :

Material price variance = (0.35*3350-1105.50) = 67 F

Material quantity variance = (1650*2-3350)*0.35 = 17.5 U

2. Calculate Crystal Charm’s direct labor variances for the month of January.

Direct labour rate variance = (12*2625-30187.50) = 1312.50 F

Direct labour efficiency variance = (1650*1.5-2625)*12 = 1800 U