1. The direct labor efficiency variance for December is 2. The direct labor rate
ID: 2454553 • Letter: 1
Question
1. The direct labor efficiency variance for December is
2. The direct labor rate variance for December is
3. The direct material usage variance for December is
Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single product are as follows: Materials (5.30 kilograms × $12.00/kilogram) = $63.60/unit. Direct labor (3.70 hours × $21.00 per hour) = $77.70/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for December: In-process beginning inventory None In-process ending inventory - 90.00% complete as to labor 1,008 units Units completed during he period 6,990 units Budgeted output 7,610 Purchases of materials (in kilograms) 41,000 Total actual direct labor cost incurred $561,376 Direct labor hours worked (AQ) 27,770 hours Materials purchase-price variance $1,690 favorable Increase in materials inventory in December 1,628 kilograms PLEASE SHOW WORK1. The direct labor efficiency variance for December is
2. The direct labor rate variance for December is
3. The direct material usage variance for December is
Explanation / Answer
Labor Efficiency variance = (Actual hours - Standard hours) x Standard rate
Standard hours for budgeted output = 7,610 x 3.7 = 28,157 standard hours
= (27,770 - 28,157) x 3.70 = $1,431.90 (Favorable variance)
Labor rate variance = (Actual Rate - Standard Rate) x Actual hours
Actual rate = $561,376 / 27,770 = $20.21
= ($20.21 - $21) x 27,770 = $21,794 (Favorable)
Direct Material Usage variance = (Actual Qty - Standard Quantity) x Standard rate
Actual qty = Opening stock + purchased stock - closing stock
= 0 + 41,000 - 1628 = 39,372
material usage variance = [39,372 - (6990 x 5.3)] x 5.3
= 12,322 (Unfavorable)
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