During June, Danby Company’s material purchases amounted to 6,200 pounds at a pr
ID: 2508357 • Letter: D
Question
During June, Danby Company’s material purchases amounted to 6,200 pounds at a price of $7.50 per pound. Actual costs incurred in the production of 2,100 units were as follows:
The standards for one unit of Danby Company’s product are as follows:
Required:
Compute the direct-material price and quantity variances, the direct-material purchase price variance, and the direct-labor rate and efficiency variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)
Direct labor: $ 121,695 ($18.30 per hour) Direct material: $ 33,000 ($7.50 per pound)Explanation / Answer
Actual Direct material used=33000/7.5= 4400 Direct-material price variance= 4400*(7.5-7.2)= $1320 Unfavorable Direct-material quantity variance =7.2*(4400-2100*2)= $1440 Unfavorable Direct-material purchase price variance= 6200*(7.5-7.2)= $1860 Unfavorable Actual direct labor hours=121695/18.3= 6650 Direct-labor rate variance =121695-(6650*18.2)= $665 Unfavorable Direct-labor efficiency variance =18.2*(6650-2100*3)= $6370 Unfavorable
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