Grace Company manufactures candles. The standard direct materials quantity requi
ID: 2475645 • Letter: G
Question
Grace Company manufactures candles. The standard direct materials quantity required to produce one large candle is 1 pound at a cost of $5 per pound. Every candle requires 2 direct labor hours at a standard cost of $3 per direct labor hour. During November, 2015, 7,200 large candles were produced using 7,500 pounds costing $43,000. At the end of November, an examination of the labor cost records showed that the company used 15,000 direct labor hours (DLHr) at a cost of $4 per hour. Using the format below, prepare an analysis of the direct labor cost variances.Explanation / Answer
AC = Actual cost per pound = 45,000 / 7500 = $6 per pound
AQ = Actual quantity used = 7500 pounds
SC = standard cost per pound = $5
SQ = Standard quantity = 1 * 7,200 = 7,200 pounds
Cost variance = AC * AQ - SC * AQ = $6 * 7,500 - $5 *7,500 = 7,500 Unfavorable
Effeciency variance = SC * AQ - SC * SQ = $5*7500 - $5 * 7,200 = $1,500 Unfavorable
Total direct material variance = Cost variance + Effeciency variance = 7,500 + 1,500 = 9,000 Unfavorable
AC = Actual cost per hour = $4 per hour
AQ = Actual hours used = 15,000 hours
SC = standard cost per hour = $3 per hour
SQ = Standard hours for actual production = 2 * 7,200 = 14,400 hours
Cost variance = AC * AQ - SC * AQ = $4 * 15,000 - $3 *15,000 = 15,000 Unfavorable
Effeciency variance = SC * AQ - SC * SQ = $3 *15,000 - $3 * 14,400 = $1,800 Unfavorable
Total direct labor variance = Cost variance + Effeciency variance = 15,000 + 1,800 = 16,800 Unfavorable
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.