Problem 2 MUST SHOW ALL WORK Crazy Inc. manufactures dress shirts and various ot

Question

Problem 2 MUST SHOW ALL WORK

Crazy Inc. manufactures dress shirts and various other clothing items. The company uses standard costing and has developed the following information about standards for its product:

Materials

5 feet per unit; $12 per foot

Labor

3 DL hours per unit; $14 per hour

Crazy Inc. planned for production of 550 dress shirts for the month of March. However, due to high demand, they actually produced 600 shirts.

During March, they purchased 3,500 feet of materials at a total cost of $36,400. They actually used 2,850 feet of materials. The remaining 650 feet were unused and they expect to use them in the following month.

During March, the assembly line workers actually worked a total of 1,650 direct labor hours. The total cost of direct labor was $20,150.

Required:

Compute the following:

Direct materials price variance.

Direct materials quantity variance.

Direct labor rate variance.

Direct labor efficiency variance.

Materials

5 feet per unit; $12 per foot

Labor

3 DL hours per unit; $14 per hour

Explanation / Answer

1)Direct materials price variance = Actual Quantity(Actual Price p.u - Standard Price p.u.)

= 2850[(36,400/3,500) - 12)

= 2850(10.40-12)

= $4,560 (F)

..

2)Direct materials quantity variance = (Standard Quantity-Actual Quantity)*Standard Price

= [(600*5)- 2850]*12

= (3,000-2,850)*12

= $1,800 (F)

..

..

3)Direct labor rate variance = Actual Quantity(Actual Rate-Standard Rate)

= 1,650[(20,150/1,650) - 14)

= 1,650(12.21-14)

= $2,950 (F)

..

..

4)Direct labor efficiency variance = (Actual Hours-Standard Hours)*Standard Rate

= (1650-600*3)*14

= $2,100(F)

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