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 Standard Unit Cost Standard Quantity 0.35 oz $22.00 per oz. 4.00 1.50 hrs $11.00 per hr Standard (Rate) Silver Crystals Direct labor S 7.70 1.40 0.35 per crystal 16.50 During the month of January, Crystal Charm made 1,520 charms. The company used 507 ounces of silver (total cost of $11,661) and 6,130 crystals (total cost of $2,022.90), and paid for 2,430 actual direct labor hours (cost of $25,515.00). Required 1. 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.) Silver Crystals Direct Material Price Variance Direct Material Quantity Variance

Explanation / Answer

Solution:

Direct material Price Variance for Silver:

STandard Price (SP) = $22 per oz. of silver

Actual Price (AP) = Total cost / Ounces used of silver = $11661 / 507 = $23 per oz.

Actual Quantity of Silver (AQ) = 507 ounces

Direct material price Variance for Silver = (SP- AP)* AQ = (22-23) * 507 = $507 (Unfavourable)

Direct material Quantity Variance for Silver:

STandard Quantity (SQ) = total charms Made * Standard quantity per charm = 1520 * 0.35 = 532 ounces

Actual Quantity (AQ) = 507 ounces

Standard Price (SP) = $22 per oz.

Direct material Quantity Variance for Silver = (SQ- AQ)* SP = (532-507)*22 = $550 (Favourable)

Direct material Price Variance for crystals:

STandard Price (SP) = $0.35 per crystal

Actual Price (AP) = Total cost / crystals used = $2022.90 / 6130 = $0.33 per crystal

Actual Quantity of crystals (AQ) = 6130 crystals

Direct material Price Variance for crystals = (SP- AP)* AQ = (0.35 - 0.33) * 6130 = $122.60 (Favourable)

Direct material Quantity Variance for Crystals:

STandard Quantity (SQ) = total charms Made * Standard quantity of crystal per charm = 1520 * 4 = 6080 crystal

Actual Quantity (AQ) = 6130 crystals

Standard Price (SP) = $0.35 per crystal

Direct material Quantity Variance for crystals = (SQ- AQ)* SP = (6080 - 6130)* 0.35 = $17.50 (Unfavourable)

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