Handmade, Inc. has developed the following standard cost data based on 60,000 di
ID: 2587576 • Letter: H
Question
Handmade, Inc. has developed the following standard cost data based on 60,000 direct labor hours, which is 75% of capacity.
Per Unit
Direct materials (6 lbs. @ $2.00/lb.) $12.00
Direct labor (1 hrs. @ $8.00/hr.) $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.) $1,558,000
Direct labor (126,000 hrs.) $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
Please show work. Thank you!
Explanation / Answer
Total Direct Materials variance=1555800-(128000*12)= 19800 U Direct materials price variance=1558000-(760000*2)= 38000 U Direct materials quantity variance=2*(760000-128000*6)= 16000 F Total Direct Labor Variance=1014300-(128000*8)= 9700 F Direct labor rate variance=1014300-(126000*8)= 6300 U Direct labor efficiency variance=8*(126000-128000*1)= 16000 F
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