Question

The Johnson Company manufactures designer blankets for international distribution. The standard costs for the manufacturer of these high-quality blankets are:

                                                Standard Costs                                   Actual Costs

Direct Materials                      4,000 pounds at $42                           4,300 pounds at $40

Direct Labor                            5,200 hours at $15                              5,500 hours at $14

Instructions:

1. Determine the (a) direct materials price variance, (b) direct materials quantity variance, and (c) total direct materials cost variance for the designer blankets.

2. Determine the (a) direct labor rate variance, (b) direct labor time variance, and (c) the total direct labor cost variance for the designer blankets.

Answer 1

a) direct material price variances = (standard price - actual price)×actual quantity

= ($42 - $40) × 4300 = $8600(favourable)

b) direct material quantity variances = (standard quantity - actual quantity)× standard price

= (4000 -4300)× $42 = $12600(UNFAVORABLE)

C) direct material cost variances = standard cost - Actual cost

= (4000×$42 - 4300×$40)= $168000 - $172000 = $4000(UNFAVORABLE)

d) direct labour rate variances = (standard rate - Actual rate)×actual hours = ($15 - $14)×5500 = $5500(favourable)

e) direct labour efficiency/time variances = (standard hours - actual hours)× standard rate

= (5200 - 5500)×$15 = $4500(UNFAVORABLE)

f) direct labour cost variances = standard cost - Actual cost

= (5200×$15- 5500×$14) = $78000 - $77000 = $1000(favourable)

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