Crystal Charm Company makes handcrafted silver charms that attach to jewelry suc

Question

Crystal Charm Company makes handcrafted silver charms that attach to jewelry such as a necklace or bracelet. Each charm is adorned with two crystals of various colors. Standard costs follow:

During the month of January, Crystal Charm made 1,630 charms. The company used 617 ounces of silver (total cost of $12,957) and 11,460 crystals (total cost of $2,635.80), and paid for 2,595 actual direct labor hours (cost of $24,652.50).

Calculate Crystal Charm’s direct materials variances for silver and crystals for the month of January. (Round your intermediate calculations and final answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Calculate Crystal Charm’s direct labor variances for the month of January. (Round your intermediate calculations and final answers to 2 decimal places.Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Standard Quantity Standard Price
(Rate) Standard
Unit Cost   Silver 0.40 oz. $ 20.00 per oz. $ 8.00      Crystals 7.00 $ 0.25 per charm 1.75      Direct labor 1.50 hrs. $ 10.00 per hr. 15.00   

Explanation / Answer

Direct Material Price Variance =( Standard Price - Actual Price)* Actual Quantity

Silver =(20-12957/617)*617

= ( 20-21)*617 i.e 617 unfavourable

Crystals = ( 0.25-2635.80/11460)*11460

= (0.25-0.23)*11460 i.e 229.20 favourable

Direct Material Quntity Variance

( Standard Quantity - Actual Quantity )* Standard Rate

Silver = ( (1630*0.40)-617)*20 i.e 700 favourable

Charms = ((1630*7)-11460)*0.25 i.e 12.5 unfavourable

Direct labour rate variance

(Standard rate - Actual Rate )* Actual Hours

( 10-(24652.50/2595))*2595 i.e 1297.50 Favourable

Direct labor efficiency variance = ( Standard hours - Actual Hours ) * Standard rate

= ( 2595-(1630*1.50)*10 i.e 1500 unfavourable

  

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