standard cost data based on 60,000 direct labor hours 2. Handmade, Inc. has deve

Question

standard cost data based on 60,000 direct labor hours 2. Handmade, Inc. has developed the following which is 75% of capacity. Direct materials (6 lbs.@ $2.00/lb.) Direct labor (1 hrs. @ $8.00/hr.) Per Unit $12.00 8.00 During the last period, the company operated at 80% of capacity and produced 128,000 units. Actual costs were: Direct materials (760,000 lbs.) Direct labor (126,000 hrs.) $1,558,000 1,014,300 Required: Determine the total direct materials and total direct labor variances, direct materials price and quantity variances and the direct labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable Total Direct Materials variance: Direct materials price variance Direct materials quantity variance Total Direct Labor Variance: Direct labor rate variance Direct labor efficiency variance

Explanation / Answer

Ans) Handmade Inc. Cost Actual Labor rate=($1014300/126000) $                        8.05 Per hour Actual Material Price=($1558000/760000) $                        2.05 Per Lbs Actual Direct Material required er unit=(760000/128000) $                        5.94 Actual Material cost=($5.94*$2.05) $                     12.17 Per Unit Standard Labor rate $                        8.00 Per hour Standard Material Price= $                        2.00 Per Lbs Standard Material cost $                     12.00 Per unit Quantity Actual Hours used 126000 Hours Actual quantity of material used 760000 Lbs Standard Hours used=(128000*1) 128000 Hours Standard Quantity of material used=(128000*6) 768000 Lbs Direct Material Price Variance AQ(AP-SP) 760000*($2.05-$2) $             38,000.00 (U) Direct Material Quantity Variance SP(AQ-SQ) $2(760000-768000) $           (16,000.00) (F) Total Direct Material Variance=Direct Material Price variance+Direct Material Quantity variance=$38000-$16000 $             22,000.00 (U) Direct Labor Rate Variance AH(AR-SR) 126000*($8.05-$8) $               6,300.00 (U) Direct Labor Efficiency Variance SR(AH-SH) $8(126000-128000) $           (16,000.00) (F) Direct Labor cost variance=Labor rate variance+Labor eficiency variance=($6300-$16000) $             (9,700.00) (F)

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