Question

Direct Materials and Direct Labor Variances

At the beginning of June, Kimber Toy Company budgeted 22,000 toy action figures to be manufactured in June at standard direct materials and direct labor costs as follows:

Direct materials	$46,200
Direct labor	23,100
Total	$69,300

The standard materials price is $0.60 per pound. The standard direct labor rate is $15.00 per hour. At the end of June, the actual direct materials and direct labor costs were as follows:

Actual direct materials	$43,300
Actual direct labor	21,600
Total	$64,900

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. Kimber Toy Company actually produced 20,000 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.

Direct materials quantity variance	$
Direct labor time variance	$

Answer 1

• All working forms part of the answer
• Given in question, there are no Material price variance or Labor rate variance. This means that any difference between Standard Cost and Actual Cost is the material quantity variance or labor time variance.
• Standard data for direct material for 20000 actual units

Standard	Cost	per pound	Pounds	Units budgeted	pounds per unit	Standard Qty (pounds) for 20000 units
Direct Material	$46,200	$0.6	77000 [46200/0.6]	22,000	3.5 [77000/22000]	70,000 pounds [3.5 x 20000 units]

Standard Cost = 70000 pounds x $0.6 = $42,000
Actual Cost (direct material) = 43,300

Direct Material Quantity Variance = Standard Cost – Actual Cost = 42000 – 43300 = $1300 UNFAVOURABLE.

• Standard data for direct labor for 20000 actual units

Standard	Cost	per hour	Hours	Units Budgeted	Hours per unit	Standard Qty (hours) for 20000 units
Direct Labor	$23100	$15	1540 [23100 / 15]	22000	0.07 hours [1540 / 22000]	1400 hours [20000 x 0.07]

Standard Cost (labor) = 1400 hours x $15 = $21,000
Actual Cost (direct labor) = $21,600

Direct Labor Time Variance = Standard Cost – Actual Cost = 21000 – 21600 = $600 UNFAVOURABLE.