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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 variance analysis

 Lenni Clothing Co. manufactures clothing in a small manufacturing facility. Manufacturing has 25 employees. Each employee presently provides 40 hours of productive labor per week. Information about a production week is as follows:

Standard wags per hr. $12.00
Standard labor time per unit 12 min.
Standard number of yds. of fabric per unit 5.0 yds.
Standard price per yd. of fabric $5.00
Actual price per yd. of fabric $5.10
Actual yds. of fabric used during the week 26,200 yds.
Number of units produced during the week 5,220
Actual wage per hr. $ 11.80
Actual hrs. for the week 1,000 hrs.

 Instructions

 Determiner (a) the standard cost per unit for direct materials and direct labor; (b) the price variance, quantity variance, and total direct materials cost variance; and (c) the rate variance, time variance, and total direct labor cost variance.

(a)

To determine

Direct material variances:

The difference between the actual material cost per unit and the standard material cost per unit for the direct material purchased is known as direct material cost variance. The direct material variance can be classified as follows:

    • Direct materials price variance.
    • Direct materials quantity variance.

Direct labor variances:

The difference between the actual labor cost in the production and the standard labor cost for actual production is known as direct labor cost variance. The direct labor variance can be classified as follows:

    • Labor rate variance.
    • Labor time variance.

To determine: The standard cost per unit for direct materials, and direct labor.

Explanation

Determine the standard cost per unit for direct materials, and direct labor.

Particulars Standard materials and labor cost per unit
Direct materials     (1)  $25.00
Direct labor           (2) $2.40
  $27.40

Table (1)

Working Notes:

(Standard direct materials cost)=Standard price per yd.×Standard number of yds.=$5.00×5.0 yds.=$25

(b)

To determine
The direct materials price variance.

(c)

To determine
The direct labor rate variance, direct labor time variance, and total direct labor cost variance.

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