Question

Peruvian Jewelry, LLC. produces jewelry using traditional methods and local materials. Its customers are department stores around the world. During April, the company worked on three orders and the job-cost records reported the following information:

Job Number	Items in Job	Material Used (grams)	Hours Worked
112	1,100	12,050	1,490
113	1,600	20,220	2,565
114	1,300	14,413	1,445

The following additional information is available:

1. The company purchased 89,000 grams of material during April at a cost of $53,200.

2. Direct labor during April amount to $82,500. Production employees were paid $15 per hour.

3. There was no work in process on April 1st. During April, job 112, 113, and 114 were completed.

4. The standard cost per item are as follows:

Direct material	12 grams at $.55 per gram	$6.60
Direct labor	1.5 hours at $14.70 per hour	$22.05
Production overhead	1.5 hours at $6 per hour	$9
Standard cost per box		$37.65

Requirements:

1. (3 points)In Excel, compute the standard cost for jobs 112, 113, 114 for April.
2. In Excel, calculate each of the following variances for each of the 3 jobs. Indicate whether each variance is favorable or unfavorable.
   • (3 points) Direct material price variance
   • (3 points) Direct material quantity variance
   • (3 points) Direct labor efficiency variance
   • (3 points) Direct labor rate variance
3. (8 points) For each of the 4 variances calculated, briefly explain (3-5 sentences) the interpretation of the variances and some possible causes of the variance. You should discuss the direct material quantity variance for each of the 3 jobs in the same paragraph noting which jobs had favorable or unfavorable variances, what that indicates, and a possible explanation for the favorable and/or unfavorable variances. You should do the same thing for each type of variances. Thus, for this requirement, you should have 4 paragraphs. Please include this in a text box in Excel.
4. (4 points) Explain perfection and practical standards. What are some of the behavioral consequences that management should consider relating to each of these types of standards?

Answer 1

Answer-1:

Standard Cost of the Jobs:

Answer-2:

Direct material price variance = AQP (AP - SP)

= 89,000 ($53,200/89,000 - $0.55) = $4,250 U

Answer-3:

Answer-4:

Answer-5:

t