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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Direct materials and direct labor variances

 At the beginning of June, Kimber Toy Company budgeted 4,800 toy action figures to be manufactured in June at standard direct materials and direct labor costs as follows:

Direct materials $ 60.000
Direct labor 48,000
Total $108,000

 The standard materials price is $5.00 per pound. The standard direct labor rate is $20.00 per hour. At the end of June, the actual direct materials and direct labor costs were as follows:

Actual direct materials $ 61,200
Actual direct labor 48,000
Total $109,200

 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 5,000 units during June.

 Determine the direct materials quantity and direct labor time variances.

(a)

To determine

Direct materials quantity variances:

The difference between the actual quantity and the standard quantity multiplied by the standard price is known as direct material quantity variance. When the actual quantity exceeds the standard quantity, the variance is unfavorable. Similarly, when the actual quantity is less than the standard quantity, the variance is favorable.

Direct labor time variance:

Direct labor time variance is the difference between actual direct labor hours, and the standard direct labor hours multiplied by standard rate per hour. When the actual direct labor hours exceeds the standard direct labor hours, the variance is unfavorable. Similarly, when the actual direct labor hour is less than the standard direct labor hour, the variance is favorable.

To determine: The direct materials quantity variance and the direct labor time variances.

Explanation

The direct materials quantity variance and the direct labor time variances are determined as follows:

Determine the standard direct materials and direct labor per unit.

Working notes:

Determine the standard direct materials quantity per unit:

Standard directmaterials lb. for June}  =Direct materialsStandard price    =$60,000$5.00 perlb.   =12,000lb. (1)

Determine the standard pounds per unit:

Standard pounds per unit} = [Standard direct materials lb.(1)Standard units ]=$ 12,000 lb.4,800 units =$ 2.50 lb. per unit (2)

Determine the standard direct labor time per unit:

Standard directlabor hrs

(b)

To determine
the standard costs for the actual June production, using the standard quantity and time rates in (a).

(c)

To determine
The direct materials quantity and direct labor time variance:

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