ABC Company manufactures purple widgets. The company has established a total standard cost for direct material and direct labor of $244.33 per widget. The total standard cost includes 21.5 pounds of direct materials at a standard cost of $10.50 per pound and 3.45 hours of direct labor at a wage rate of $8.50 per hour. The following data pertain to April: The company purchased 500,000 pounds of material, 90% of the material purchased was used for direct materials. The total cost of the direct materials was $4,050,000. The total amount paid for direct labor was $600,750. The actual direct labor hours worked was 67,500 hours. The company actually produced 20,000 widgets for the month of April Required: Important – to avoid rounding errors – round your answers to 2 decimals points. For example: 10.456789 should be rounded to 10.46 1. Calculate the Total Direct Materials Variance 2. Calculate the Total Direct Labor Variance 3. What is the proper interpretation of the following variance (what are some causes for the variances)? a. Unfavorable Direct Materials Price Variance b. Favorable Direct Materials Quantity Variance c. Favorable Total Direct Materials Variance d. Favorable Direct Labor Rate Variance e. Unfavorable Direct Labor Time Variance f. Unfavorable Total Direct Labor Variance
ABC Company manufactures purple widgets. The company has established a total
- The company purchased 500,000 pounds of material, 90% of the material purchased was used for direct materials.
- The total cost of the direct materials was $4,050,000.
- The total amount paid for direct labor was $600,750.
- The actual direct labor hours worked was 67,500 hours.
- The company actually produced 20,000 widgets for the month of April
Required: Important – to avoid rounding errors – round your answers to 2 decimals points. For example: 10.456789 should be rounded to 10.46
1. Calculate the Total Direct Materials Variance
2. Calculate the Total Direct Labor Variance
3. What is the proper interpretation of the following variance (what are some causes for the variances)?
a. Unfavorable Direct Materials Price Variance
b. Favorable Direct Materials Quantity Variance
c. Favorable Total Direct Materials Variance
d. Favorable Direct Labor Rate Variance
e. Unfavorable Direct Labor Time Variance
f. Unfavorable Total Direct Labor Variance
4. Explain who is in the best position in the organization to influence each of these variances.
a. Direct Materials Price Variance
b. Direct Materials Quantity Variance
c. Direct Labor Rate Variance
d. Direct Labor Time Variance
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