Direct Materials and Direct Labor Variance Analysis Lenni Clothing Co. manufactu

Question

Direct Materials and Direct Labor Variance Analysis

Lenni Clothing Co. manufactures clothing in a small manufacturing facility. Manufacturing has 25 employees. Each employee presently provides 40 hours of productive labor per week. Information about a production week is as follows:

Required:

a. Determine the standard cost per unit for direct materials and direct labor. Round the cost per unit to two decimal places.

b. Determine the price variance, quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

c. Determine the rate variance, time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Standard wage per hr. $12.00 Standard labor time per unit 12 min. Standard number of yds. of fabric per unit 5.0 yds. Standard price per yd. of fabric $5.00 Actual price per yd. of fabric $5.10 Actual yds. of fabric used during the week 26,200 yds. Number of units produced during the week 5,220 Actual wage per hr. $11.80 Actual hrs. for the week 1,000 hrs.

Explanation / Answer

A) Standard cost for direct material per unit = 5*5 =25 per unit Standard cost for direct labour per unit = 12*12/60=$2.4 per unit Total Standard cost per unit = total labour standard cost+ total material standard cost Total Standard cost per unit = 25+2.40 = 27.40 B) Direct material price variance = (standard price-actual price )*actual qty (5-5.10)*26200 (2620) unfavourable Direct material qty variance = (standard qty for actual output-actual qty)*std rate [(5220*5)-26200)]*5 (500) unfavourable Direct Material cost variance= ( standard cost - actual cost) (26100*5)-(26200*5.10) (3120) unfavourable Direct Labour rate variance= ( std rate- actual rate)*actual hours (12-11.80)*1000 200 favourable Direct labour time variance= (std hours for actual output-actual hours)*std rate (1044-1000)*12 528 favourable Direct labour cost Variance = ( std cost - actual cost) (1044*12)-(1000*11.80) 12528-11800 728 favourable

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