Rusty\'s Bakery has the following standards for one unit of bread products Direc

Question

Rusty's Bakery has the following standards for one unit of bread products

Direct material
Quantity 7 pounds per unit
Price per poudn $10 per pound
Direct Labor
Quantity 3 hours per unit
Rate per hour $18 per hour
Actual costs incurred in the production of 2,800 units were as follows:

Direct material $195,350 ($10.50 per pound)
Direct Labor $392,750 ($17.50 per hour)

All materials purchased were consumed during the period

Calculate the direct-material price and quantity variances, and the direct labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable

Explanation / Answer

(1) Direct Material Price Variance = (2800*10.50) - (2800*10) = $1,400 (Unfavorable)

(2) Actual Material Quantity = ($195,350/$10.50)/2800 = 6.65

Direct Material Quantity Variance = (7-6.65)*10 = $3.5 (Favorable)

(3) Actual Labor hours = $392,750/17.50 = 22,443 (for 2800 units)

Direct Labor Rate Variance = (22,443*17.50) - (22,443-18) = $11,221.50 (Favorable)

(4) Direct Labor Efficiency Variance = (22,443*18) - (2800*3*18) = $252,774 (Unfavorable)

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