Direct Materials and Direct Labor Variances At the beginning of August, Havasu Printers Company budgeted 30,000 books to be printed in August at standard direct materials and direct labor costs as follows: Direct materials $15,000 Direct labor 72,000 Total $87,000 The standard materials price is $0.40 per pound. The standard direct labor rate is $12 per hour. At the end of August, the actual direct materials and direct labor costs were as follows: Actual direct materials $13,320 Actual direct labor 60,000 Total $73,320 There were no direct materials price or direct labor rate variances for August. In addition, assume no changes in the direct materials inventory balances in August. Havasu Printers Company actually produced 24,500 units during August. Determine the direct materials quantity variance , the direct labor time variance and the total variance. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount. Direct materials quantity variance $ Unfavorable Direct labor time variance Unfavorable Total variance $ Unfavorable
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Direct Materials and Direct Labor Variances
At the beginning of August, Havasu Printers Company budgeted 30,000 books to be printed in August at standard direct materials and direct labor costs as follows:
| Direct materials | $15,000 |
| Direct labor | 72,000 |
| Total | $87,000 |
The standard materials price is $0.40 per pound. The standard direct labor rate is $12 per hour. At the end of August, the actual direct materials and direct labor costs were as follows:
| Actual direct materials | $13,320 |
| Actual direct labor | 60,000 |
| Total | $73,320 |
There were no direct materials price or direct labor rate variances for August. In addition, assume no changes in the direct materials inventory balances in August. Havasu Printers Company actually produced 24,500 units during August.
Determine the direct materials quantity variance , the direct labor time variance and the total variance. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount.
| Direct materials quantity variance | $ | Unfavorable |
| Direct labor time variance | Unfavorable | |
| Total variance | $ | Unfavorable |
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