Direct Materials and Direct Labor Variances At the beginning

Direct Materials and Direct Labor Variances

At the beginning of June, Bezco Toy Company budgeted 15,000 toy action figures to be manufactured in June at standard direct materials and direct labor costs as follows:

The standard materials price is $0.7 per pound. The standard direct labor rate is $14 per hour. At the end of June, the actual direct materials and direct labor costs were as follows:

There were no direct materials price or direct labor rate variances for June. In addition, assume no changes in the direct materials inventory balances in June. Bezco Toy Company actually produced 13,500 units during June.

Determine the direct materials quantity and direct labor time variances. Round your per unit computations to two decimal places, if required. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Solution

Total Standard Qty= Standard cost / Std Cost per unit of raw material

                               =$15,750/$0.70

                               =22,500

Std Qty per unit = Total Standard Qty/ Budgeted Production

                               =22,500/15,000

                            =1.5 pounds

Std Qty= Std Qty for actual production

               = Std Qty per unit x Actual production

                =1.5 x 13,500
                =20,250

Direct materials quantity variance= (Actual qty x Std Price ) –( Std Qty x Std price)

                                                           =$14,600-(20,250 x $0.70)

                                                        =$14,600-$14,175

                                                        =$425 unfavorable

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Total Standard hrs= Standard cost / Std Cost per hr

                               =$12,600/$14

                               =900

Std hrs per unit = Total Standard hrs/ Budgeted Production

                               =900/15,000

                            =0.06ounds

Std hrs= Std hrs for actual production

               = Std hrs per unit x Actual production

                =0.06 x 13,500
                =810 hrs

Direct Labor time variance= (Actual hrs x Std rate per hr ) –( Std hrs x Std rate per hr)

                                                           =$11,700-(20,250 x $0.70)

                                                        =$11,700-$11,340

                                                        =$360 unfavorable