Divertido Company produces single-colored T-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established: Direct materials (2.4 lbs. @ $0.95) Direct labor (0.75 hr. @ $7.40) $2.28 5.55 Standard prime cost $7.83 During the year, 79,500 pounds of material were purchased and used for the changeover activity. There were 30,000 batches produced, with the following actual prime costs: Direct materials Direct labor $65,520 $191,160 (for 22,450 hrs.) Required: Compute the materials and labor variances associated with the changeover activity, labeling each variance as favorable or unfavorable. Material Variances Price variance Usage variance Labor Variances x Favorable 7,125 ✓ Unfavorable Rate variance Unfavorable Efficiency variance 370 ✔ Favorable

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter9: Standard Costing: A Functional-based Control Approach
Section: Chapter Questions
Problem 28P: Haversham Corporation produces dress shirts. The company uses a standard costing system and has set...
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Divertido Company produces single-colored T-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established:
Direct materials (2.4 lbs. @ $0.95)
Direct labor (0.75 hr. @ $7.40)
$2.28
5.55
Standard prime cost
$7.83
During the year, 79,500 pounds of material were purchased and used for the changeover activity. There were 30,000 batches produced, with the following actual prime costs:
Direct materials
Direct labor
$65,520
$191,160 (for 22,450 hrs.)
Required:
Compute the materials and labor variances associated with the changeover activity, labeling each variance as favorable or unfavorable.
Material Variances
Price variance
Usage variance
Labor Variances
x Favorable
7,125 ✓ Unfavorable
Rate variance
Unfavorable
Efficiency variance
370 ✔
Favorable
Transcribed Image Text:Divertido Company produces single-colored T-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established: Direct materials (2.4 lbs. @ $0.95) Direct labor (0.75 hr. @ $7.40) $2.28 5.55 Standard prime cost $7.83 During the year, 79,500 pounds of material were purchased and used for the changeover activity. There were 30,000 batches produced, with the following actual prime costs: Direct materials Direct labor $65,520 $191,160 (for 22,450 hrs.) Required: Compute the materials and labor variances associated with the changeover activity, labeling each variance as favorable or unfavorable. Material Variances Price variance Usage variance Labor Variances x Favorable 7,125 ✓ Unfavorable Rate variance Unfavorable Efficiency variance 370 ✔ Favorable
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