Last year, Vera Corporation budgeted for production and sales of 20,000 cloth ha

Question

Last year, Vera Corporation budgeted for production and sales of 20,000 cloth handbags. Vera produced and sold 19,250 handbags. Each handbag has a standard requiring 4 feet of material at a budgeted cost of $2.50 per foot and 45 minutes of sewing time at a cost of $0.28 per minute. The handbags sell for $45.00. Actual costs for the production of 19,250 handbags were $201,600 for materials (80,000 feet at $2.52 per foot) and $260,400 for labor (868,000 minutes at $0.30 per minute).

a) What is the handbags direct material price variance?

b) what is the handbags direct material usage variance?

c) what is the handbags direct labor rate variance?

Explanation / Answer

A. What is the handbag's direct material price variance?

direct material price variance = 201600 - 80000*2.5 = $1600 U

B. What is the handbag's direct material usage variance?

direct material usage variance = (80000-19250*4)*2.5 = $7500 U

C. What is the handbag's direct labor rate variance?

direct labor rate variance = 260400 - 868000*0.28 = $17360 U

D. What is the handbag's direct labor efficiency variance?

direct labor efficiency variance = (868000-19250*45)*0.28 = $490 U

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