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 Quantity Standard (Rate) 0.55 oz. $26.00 per oz. 8.00 0.25 per crystal 1.50 hrs. $15.00 per hr Standard Unit Cost $ 14.30 Crystals Direct labor 2.00 22.50 During the month of January, Crystal Charm made 1,560 charms. The company used 823 ounces of silver (total cost of $22,221) and 12,530 crystals (total cost of $2,881.90), and paid for 2,490 actual direct labor hours (cost of S36,105.00) 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

1. Material price variance =Actual Quanity * Actual Price - Actual Quantity * standard Price

Where actual quantity for silver = 823 oz / 1560 charmp =0.5276 oz and actual price = $22,221 / 823 oz = $ 27

So price variance for silver = $22,221 - 823 oz * $26 = 22,221 - 21, 398 = $823 adverse

Where actual quantity for Crystal = 12,530 / 1560 charmp =8.032 and actual price = $2,881.90 / 12,530 = $ 0.23

So price variance for Crystal = $2,881.90 - 12,530 * $ 0.25 = 2,881.90 - 3,132.50 = - $250.60 favourable

Material quantity variance =(Actual Quanity - Standard Quantity )* standard unit Price

So quantity variance for silver = (823 oz - 0.55 oz * 1560 unit)* $14.30 = (823 oz - 858 oz)* $14.30= - $500.50 favourable

So quantity variance for Crystal = (12, 530 - 8 * 1560 unit)* $2 = (12,530 - 12,480)* $14.30= $100 adverse

2. Direct labour rate variance = (Actual rate - standard rate ) * Actual hours worked

= ($36,150 / 2490 hours - $15)2490 hours = ($14.518 - $15)* 2490 = -$1200 favourable

Direct labour efficiency variance = (Actual hours - standard hours ) * standard rate

= (2490 hours - 1560 * 1.5 hours)* $15 = (2490 - 2340)* $15 = $2250 adverse

When negative compare with actual it is favourable.

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