Materials and Labor Variances
Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established:
Direct materials (2.4 lbs. @ $0.95) | $2.28 |
Direct labor (0.75 hr. @ $7.40) | 5.55 |
Standard prime cost | $7.83 |
During the year, 79,500 pounds of material were purchased and used for the changeover activity. There were 30,000 batches produced, with the following actual prime costs:
Direct materials | $66,780 |
Direct labor | $174,822 (for 22,450 hrs.) |
Required:
Compute the materials and labor variances associated with the changeover activity, labeling each variance as favorable or unfavorable.
Material Variances | ||
Price variance | $ | |
Usage variance | $ | |
Labor Variances | ||
Rate variance | $ | |
Efficiency variance | $ |
Materials price Variance = Actual Quantity*Standard Price - Actual Cost
= 79500 * 0.95 - 66780 = $ 8,745 F
Materials Usage Variance = Standard Quantity * Standard Price - Actual Quantity*Standard Price
= 30000*2.28 - 79500*0.95 = $ 7,125 U
Labour rate variance = Actual Hours*Standard Price - Actual Cost
= 22450 * 7.40 - 174822 = $ 8,692 U
Labour Efficiency Variance = Standard Hours * Standard Price - Actual Hours*Standard Price
= 30000*5.55 - 22450*7.40 = $ 370 F
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