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In: Accounting

Direct Materials and Direct Labor Variance Analysis Lenni Clothing Co. manufactures clothing in a small manufacturing...

  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.

    Price variance $
    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.

    Rate variance $
    Time variance $
    Total direct labor cost variance $

Solutions

Expert Solution

a.

Standard quantity/hours per unit Standard price/rate per quantity/hour = Standard cost per unit

Direct material

5 Yards $5 Per yard = $25 Per unit
Direct labor 12 Minutes $12 Per hour = 2.4 ($12/60*12) Per unit
Total cost = $27.4 Per unit

b.

Price variance = (Standard price - Actual price) * Actual quantity

Price variance = ($5 - $5.10) * 26,200 = $2,620 Unfavorable

Quantity variance = (Standard quantity - Actual quantity) * Standard price

Quantity variance =[(5,220*5) - 26,200]* $5

Quantity variance =(26,100 - 26,200) * $5 = $500 Unfavorable

Total direct material cost variance = $2,620U+ $500 U = $3,120 Unfavorable

c.

Rate variance = (Standard rate - Actual rate) * Actual hours

Rate variance = ($12 - $11.80) * 1,000 = $200 Favorable

Time variance = (Standard hours - Actual hours) * Standard rate

Time variance =[5,220*12/60) - 1,000] * $12

Time variance =(1,044 - 1,000) * $12 = $528 Favorable

Total direct labor cost variance = $200 F + $528F = $728 Favorable


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