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 | 0.30 | oz. | $ | 30.00 | per oz. | $ | 9.00 | ||
| Crystals | 5.00 | $ | 0.45 | per crystal | 2.25 | ||||
| Direct labor | 1.50 | hrs. | $ | 19.00 | per hr. | 28.50 | |||
During the month of January, Crystal Charm made 1,610 charms. The
company used 458 ounces of silver (total cost of $14,198) and 8,100
crystals (total cost of $3,483.00), and paid for 2,565 actual
direct labor hours (cost of $47,452.50).
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.)
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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.)
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Answer for 1)
Direct material price variance:
(STD. Price-actual price)actual quantity
For silver:($30-($14198/458 ounce))×458 ounce
$458 U
For crystal:($0.45-($3483/8100 crystal)×8100 crystals
$162 F
Direct material quantity variance:
(STD. Quantity -actual quantity)std. Rate
For silver:((1610 charms×0.30ounce)-458 ounce)×$30
$750 F
For crystal:((1610 charms×5 crystal)-8100 charms)×$0.45
$22.5 U
Answer for 2)
Direct labour rate variance:
(STD. Rate - actual rate)×actual hours
=(($19-($47452.5/2565hours))×2565 hours
=$1282.5 F
Direct labour efficiency variance:
(STD. Hours -Actual hours)×std. Rate
((1.5 hours×1610 charms)-2565 hours)×$19
=$2850 U
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