Stardress Company manufactures dresses. It has 20 production employees. Each emp

Question

Stardress Company manufactures dresses. It has 20 production employees. Each employee currently provides 35 hours of productive labor per week. Details for a production week are as follows.

Required: a] compute the following 1. Standard cost per dress for direct matierals and direct labor 2. Direct material price and quantity variances 3. Total direct materials cost variance 4. Direct labor rate and efficiency variances 5. Total direct labor cost variance
b] provide the likely reasons for variances determined in a]
Required: a] compute the following 1. Standard cost per dress for direct matierals and direct labor 2. Direct material price and quantity variances 3. Total direct materials cost variance 4. Direct labor rate and efficiency variances 5. Total direct labor cost variance
b] provide the likely reasons for variances determined in a] Standard: Wage rate per hour Labour hour per dress Materials per dress Materials price per metre 2.90 $10.80 12 min 3.8 metres DM Actua1: Materials price per metre Materials used during the week Number of dresses produced during the week 3,250 Wage rate per hour $2.75 12,100 metres $11.00 700 Hours worked per week

Explanation / Answer

Answer:

a)

1) Standard Cost per dress for direct material and direct labour

Standard Cost of Direct Material Per Dress (3.8 Meters material per dress x $2.90 material price per meter)

$11.02

Standard Cost of Direct Labour Per Dress (12/60 hours per dress x $10.80 wage rate per hour)

$2.16

Total Standard Cost for Direct material and Direct Labour

$13.18

2) Direct Material Price and Quantity Variance

Here only one information is given Actual Material used during the week = 12,100 metres. Hence it is assumed this quantity is actual purchased quantity.

Direct Material Price Variance = Actual Quantity Purchased (Standard Price Per Unit – Actual Price Per Unit)

Actual Quantity Purchased = 12,100 ( $2.90 - $2.75 ) = $1,815 Favorable

Direct Material Quantity Variance = Standard Price (Standard Quantity for Actual Output – Actual Quantity used)

Standard Quantity for Actual Output = Actual Output x Standard Quantity of material per dress = 3,250 x 3.8 = 12,350 meters

Direct Material Quantity Variance = $2.90 (12,350 – 12,100) = $725 favorable

3)

Total Direct Material Cost Variance = Direct Material Price Variance + Direct Material Usage Variance = $1,815 + $725 = $2,540 favorable

4)

Direct Labour Rate Variance = Actual Time (Standard Rate – Actual Rate) = 700 ($10.80 - $11) = $140 Unfavorable

Direct Labour Efficiency Variance = Standard Rate (Standard Hours for Actual Output – Actual Hours)

Standard Hours for Actual Output = Number of dress produced during the week x labour hour per dress = 3,250 x 12 /60 = 650 Hours

Direct Labour Efficiency Variance = $10.80 (650 – 700) = $540 Unfavorable

5)

Total Direct Labour Cost Variance = Direct Labour Rate Variance + Direct Labour Efficiency Variance = $140 + $540 = $680 Unfavorable

b) Reason for variances determined in a is as follows:

Material Price Variance ----- arises due to difference in actual material purchase price from standard material price.

Material Usage Variance ---- arises due to difference in actual usage of material from standard usage of material.

Similarly,

Direct Labour Rate Variances arises due to difference in actual rate paid from standard rate.

Direct Efficiency Variance arises due to deviation in working hours actual worked from the set standard.

Standard Cost of Direct Material Per Dress (3.8 Meters material per dress x $2.90 material price per meter)

$11.02

Standard Cost of Direct Labour Per Dress (12/60 hours per dress x $10.80 wage rate per hour)

$2.16

Total Standard Cost for Direct material and Direct Labour

$13.18

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