Question

1. Direct Materials and Direct Labor Variance Analysis

   Lenni Clothing Co. manufactures clothing in a small manufacturing facility. Manufacturing has 25 employees. Each employee presently provides 40 hours of productive labor per week. Information about a production week is as follows:

   Standard wage per hr.	$12.00
   Standard labor time per unit	12 min.
   Standard number of yds. of fabric per unit	5.0 yds.
   Standard price per yd. of fabric	$5.00
   Actual price per yd. of fabric	$5.10
   Actual yds. of fabric used during the week	26,200 yds.
   Number of units produced during the week	5,220
   Actual wage per hr.	$11.80
   Actual hrs. for the week	1,000 hrs.

   Required:

   a. Determine the standard cost per unit for direct materials and direct labor. Round the cost per unit to two decimal places.

   Direct materials standard cost per unit	$
   Direct labor standard cost per unit
   Total standard cost per unit	$

   b. Determine the price variance, quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

   Direct materials price variance	$
   Direct materials quantity variance
   Total direct materials cost variance	$

   c. Determine the rate variance, time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

   Direct labor rate variance	$
   Direct labor time variance
   Total direct labor cost variance	$

Answer 1

• Workings

Actual DATA for		5220	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	26200	$                   5.10	$        133,620.00
Direct labor	1000	$                11.80	$           11,800.00

Standard DATA for		5220	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 5 yards x 5220 units)=26100 yards	$                   5.00	$     130,500.00
Direct labor	( 0.2 hours x 5220 units)=1044 hours	$                12.00	$       12,528.00

• Requirement [a]

Direct materials standard cost per unit	$ 25.00
Direct labor standard cost per unit	$ 2.40
Total standard cost per unit	$ 27.40

• Requirement [b]

Direct materials price variance	$ 2620	U
Direct materials quantity variance	$ 500	U
Total direct materials cost variance	$ 3120	U
	$

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                        5.00	-	$                       5.10	)	x	26200
	-2620
	Variance		$              2,620.00			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	26100	-	26200	)	x	$                           5.00
	-500
	Variance		$                  500.00			Unfavourable-U
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$           130,500.00	-	$          133,620.00	)
	-3120
	Variance		$              3,120.00			Unfavourable-U

• Requirement [c]

Direct labor rate variance	$ (200)	F
Direct labor time variance	$ (528)	F
Total direct labor cost variance	$ (728)	F

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                     12.00	-	$                    11.80	)	x	1000
	200
	Variance		$                  200.00			Favourable-F
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	1044	-	1000	)	x	$                        12.00
	528
	Variance		$                  528.00			Favourable-F
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$             12,528.00	-	$            11,800.00	)
	728
	Variance		$                  728.00			Favourable-F