Problem 10-35 Direct-Material and Direct-Labor Variances (LO 10-1,10-3) During M

Question

Problem 10-35 Direct-Material and Direct-Labor Variances (LO 10-1,10-3) During May, Joliet Fabrics Corporation manufactured 510 units of a special multilayer fabric with the trade name Stylex. The following information from the Stylex production department also pertains to May Direct material purchased 18,100 yards at $1.39 per yard Direct material used: 9,600 yards at $1.39 per yard Direct labor: 2,200 hours at $9.16 per hour $25,159 13,344 20,152 The standard prime costs for one unit of Stylex are as follows Direct material: 20 yards at $1.36 per yard Direct labor: 3 hours at $6.00 per hour Total standard prime cost per unit of output $27.20 18.00 $45.20 Required Compute the following variances for the month of May. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "O" for no effect (i.e., zero variance). 1. Direct-material price variance 2. Direct-material quantity variance 3. Direct-material purchase price variance 4. Direct-labor rate variance 5. Direct-labor efficiency variance nfavorable avorable Unfavorable Unfavorable nfavorable

Explanation / Answer

1.Material price variance = (Standard price – Actual price) x Actual quantity

                                      = ($ 1.36 - $ 1.39) x 9,600 = - $ 0.03 x 9,600 =- $ 288    U

Standard quantity = 20 yards x 510 units = 10,200 yards

2.Material quantity variance = (Standard quantity – Actual quantity) x standard price

                                      = (10,200 – 9,600) x $ 1.36 = 600 x $ 1.36 = $ 816 F

3.Direct material purchase price variance = (Standard price – actual price) x Actual quantity purchased

                                                = ($ 1.36 – $ 1.39) x 18,100 = - $ 0.03 x 18,100 = - $ 534    U

4.Labor Rate Variance = (Standard rate – Actual rate) × Actual hour

                                = ($ 6 - $ 9.16) x 2,200 = - $ 3.16 x 2,200 = - $ 6,952   U

5. Standard hours = 3 hours x 510 units = 1,530 hours

Labor efficiency variance = (Standard hours - Actual hours) x Standard rate

                              = (1,530 – 2,200) x $ 6 = - 670 x $ 6 = - 4,020     U

Answer:

1

Direct-material price variance

288

U

2

Direct-material quantity variance

816

F

3

Direct-material purchase price variance

534

U

4

Direct-labor rate variance

6,952

U

5

Direct-labor efficiency variance

4,020

U

1

Direct-material price variance

288

U

2

Direct-material quantity variance

816

F

3

Direct-material purchase price variance

534

U

4

Direct-labor rate variance

6,952

U

5

Direct-labor efficiency variance

4,020

U

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