Chicken Nuggets, LLC, provides chicken nuggets to fast food restaurants. The sta

Question

Chicken Nuggets, LLC, provides chicken nuggets to fast food restaurants. The standard cost card for chicken nuggets indicates each nugget takes two ounces of chicken meat at $0.03 per ounce, 30 seconds of direct labor at $12.00 per hour, and 30 seconds of overhead at $6.00 per hour, for a total standard cost of $0.21 per nugget. Current production cost for 200,000 nuggets show material cost of $11,024 for 440,960 ounces of chicken at $0.025 per ounce; $19,380 for 1,675 hours of direct labor at $11.57 per hour; and $10,050 of overhead applied for 1,675 hours at $6.00 per hour. Legend: U = Unfavorable F = Favorable (Include U or F, after the amount)

(10) The direct material quantity (usage) variance is calculated to be ________?

(10) The direct labor efficiency variance is calculated to be ________?

(10) The direct labor rate variance is calculated to be ________?

Explanation / Answer

Direct Material Usage Variance

Actual usage = 440960 onces/2 (since 1 nugget = 2 ounces)

= 220,480

Standard usage = 200,000

Standard cost per unit = 0.06 (given)

= (Actual usage - Standard usage) x Standard cost per unit

= (220480 - 200000) x 0.06

= 12288 Unfavourable (since the DMV is higher than the standard cost of material i.e. $11024)

Direct labour efficiency variance

= (Actual Hour x Standard rate) - (Standard hour x Standard rate)

= (1667x12) - (1675x12)

=20004 - 20100

= 96 Favourable (since actual hours is lower than the standard hours)

Direct Labour rate Variance

= (Standard rate - Actual rate) x Actual Hour

= (12-11.57) x 1675

= 720.25 Favourable ( since actual rate is lower than the standard rate)

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