Question

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	0.25	oz.		$	29.00	per oz.		$	7.25
Crystals	4.00			$	0.40	per crystal			1.60
Direct labor	2.00	hrs.		$	18.00	per hr.			36.00

During the month of January, Crystal Charm made 1,600 charms. The company used 375 ounces of silver (total cost of $11,250) and 6,450 crystals (total cost of $2,451.00), and paid for 3,350 actual direct labor hours (cost of $58,625.00).

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

Silver :

Direct material price variance = (Standard price-actual price)actual quantity

= (29*375-11250)

Direct material price variance = 375 U

Direct material quantity variance = (Standard qty-actual qty)standard price

= (1600*.25-375)*29

Direct material quantity variance = 725 F

Crystals

Direct material price variance = (Standard price-actual price)actual quantity

= (0.4*6450-2451)

Direct material price variance = 129 F

Direct material quantity variance = (Standard qty-actual qty)standard price

= (1600*4-6450)*.4

Direct material quantity variance = 20 U

Direct labour

Direct labour rate variance = (Standard rate-actual rate)actual hours

= (18*3350-58625)

Direct labour rate variance = 1675 F

Direct labour efficiency variance = (Standard hr-actual hr)standard rate

= (1600*2-3350)*18

Direct labour efficiency variance = 2700 U