During June, Danby Company\'s material purchases amounted to 6,100 pounds at a p

Question

During June, Danby Company's material purchases amounted to 6,100 pounds at a price of $7.40 per pound. Actual costs incurred in the production of 2,100 units were as follows Direct labor: Direct material: $119,210 ($18.20 per hour) $31,820 ($7.40 per pound) The standards for one unit of Danby Company's product are as follows Direct Labor: Direct Material: Quantity, 3 hours per unit Rate, $18.10 per hour Quantity, 2 pounds per unit Price, $7.10 per pound Required Compute the direct-material price and quantity variances, the direct-material purchase price variance, and the direct-labor rate and efficiency variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "O" for no effect (i.e., zero variance).) Direct-material price variance Direct-material quantity variance Direct-material purchase price variance Direct-labor rate variance Direct-labor efficiency variance

Explanation / Answer

Direct material price varinace = (Standard price - actual price) x Actual quantity used
= ($7.10 - $7.40) x $31,820 / $7.40
= $0.30 x 4,300 = $1,290 Unfavorable

Direct material quantity varinace = (Standard quantity - actual quantity used) x Standard price
= (2,100 x 2 - 4,300) x $7.10
= $710 Unfavorable

Direct material purchase price varinace = (Standard price - actual price) x quantity purchased
= ($7.10 - $7.40) x 6,100
= = $1,830 Unfavorable

Direct labor rate varinace = (Standard rate - actual rate) x Actual hours
= ($18.10 - $18.20) x $119,210 / $18.20
= $0.10 x 6,550 = $655 Unfavorable

Direct labor efficiency varinace = (Standard hours - actual hours) x Standard rate
= (2,100 x 3 - 6,550) x $18.10
= $4,525 Unfavorable

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