Shade Company adopted a standard cost system several years ago. The standard cos

Question

Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single product are as follows: Materials (4.70 kilograms x $11.00/kilogram) = $51.70/unit. Direct labor (3.30 hours x $18.00 per hour) = $59.40/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for December: In-process beginning inventory in-process ending inventory-80.00% complete as to labor Units completed during he period Budgeted output Purchases of materials in kilograms) Total actual direct labor cost incurred Direct labor hours worked (AQ) Materials purchase-price variance Increase in materials inventory in December None 905 units 6,270 units 6,750 37,000 $495,403 24,500 hours $1,460 favorable 1,468 kilograms The direct labor efficiency variance for December is: $25,556 unfavorable $54,403 favorable $25,556 favorable $54,403 unfavorable $79,959 unfavorable

Explanation / Answer

ACTUAL DIRECT LABOR HOURS WORKED (AQ)=24500

STANDARD DIRECT LABOR HOURS (SQ) =EQUIVALENT UNITS COMPLETED*3.30HOURS PER UNIT

=6994*3.3

=23080.2

WORKING:EQUIVALENT UNITS

COMPLETED UNITS(6270*100%) =6270

IN PROCESS INVENTORY(905*80%) = 724

TOTAL =6994

STANDARD DIRECT LABOR RATE (SR)=$18.00 PER HOUR

DIRECT LABOR EFFICIENCY VARIANCE=(SQ-AQ)*SR

=(23080.2-24500)*18

=25556 UNFAVORABLE (ROUNDED OFF)

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