Crystal Charm Company makes handcrafted silver charms that attach to jewelry suc

Question

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:

During the month of January, Crystal Charm made 1,540 charms. The company used 663 ounces of silver (total cost of $16,575) and 9,290 crystals (total cost of $3,994.70), and paid for 2,460 actual direct labor hours (cost of $30,750.00).

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.)

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.)

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:

Explanation / Answer

Direct Material Variances include:

1. Direct Material price Variance = Actual Qty * Actual Price - Actual Qty * Standard Price

= Actual Quantity * (Actual Price - Standard Price)

2. Direct Material Yield Variance = (Actual Qty - Standard Qty) * Standard Price

Silver:

1. Direct Material price Variance = 663 * (16575/663 - 24)

= 663 * (25-24) = 663 * 1 = 663 (Favourable)

2. Direct Material Yield Variance = (663 - 1540*.45) * 24

= (663 - 693) * 24 = (720) (Unfavourable)

Crystals :

1.

1. Direct Material price Variance = 9290 * (3994.7/9290 - .45)

= 9290 * (.43-.45) = 9290 * -.02 = (185.80)(Unfavourable)

2. Direct Material Yield Variance = (9290 - 1540*6) * .45

= (9290 - 9240) * .45 = 22.50(Favourable)

2. Direct Labour Variances include:

1. Direct Labor Rate Variance = Actual Hours x Actual Rate - Actual Hours x Standard Rate

   = Actual Hours * (Actual Rate - Standard Rate)

   = 2460 * (30750/2460 - 13) = (1230)(Unfavourable)

2. Labor efficiency variance = (Actual hours - Standard hours) x Standard rate

   = (2460 - 1540*1.5) * 13 = 1950(Favourable)

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