1. Standards and Variance Analysis. Retro Wear manufactures dresses in a small f
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Question
1. Standards and Variance Analysis.
Retro Wear manufactures dresses in a small facility in Canton, New York. Information about the production week is as follows:
Standard wage per hour $10.80
Standard labor time per dress 12 minutes
Standard number of yards of fabric per dress 3.7 yards
Standard price per yard of fabric $2.95
Actual price per yard of fabric $2.75
Actual yards of fabric used this week 12,100 yards
Number of dresses made this week 3,250
Actual wage per hour $11.00
Actual hours worked this week 700 hours
Required:
A) Determine the total DIRECT MATERIALS cost variance, B) the DM price variance, C) and the DM quantity variance. For full credit, show your work and indicate Favorable or Unfavorable along with your variance amount.
Explanation / Answer
A)
Direct material cost variance (MCV):
Standard labor time 1dress = 12 minutes
Number of dresses made per 1 hour (60 minutes / 12 minutes) =5 dresses
Total number of dress made (700 hours * 5dresses) = 3,500 dresses
Required yard per dress = 3.7 yards
Total standard required yard (3,500 * 3.7 yard) = 12,950 yards
RSQ = 12,025 /12,950 *12,100 yards
= 11,235.7 yards
MCV = (SQ * SP) – (AQ *AP)
= (11,235.7 yards * $2.95) – (12,100 yards * $2.75)
= $33,145 - $33,275
=$130 (U)
B)
Direct material Price variance (MPV):
MPV = AQ * (SP-AP)
= 12,100 yards *($2.95 - $2.75)
= $2,420 (F)
(c)
Direct Material Quantity variance (MQV) (or) Material usage variance (MUV):
(MQV) or (MUV) = SP * (RSQ –AQ)
= $2.95 * (11,235.7 - 12,100 yards)
= $2,549.69 (U)
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