Question

Direct Materials and Direct Labor Variances At the beginning of June, Kimber Toy Company budgeted 24,000 toy action figures to be manufactured in June at standard direct materials and direct labor costs as follows: Direct materials $25,200 Direct labor 25,200 Total $50,400 The standard materials price is $0.70 per pound. The standard direct labor rate is $15.00 per hour. At the end of June, the actual direct materials and direct labor costs were as follows: Actual direct materials $22,800 Actual direct labor 22,800 Total $45,600 There were no direct materials price or direct labor rate variances for June. In addition, assume no changes in the direct materials inventory balances in June. Kimber To Company actually produced 21,100 units during June. Determine the direct materials quantity and direct labor time variances. Round your per unit computations to two decimal places, if required. Enter a favorable variance a negative number using a minus sign and an unfavorable variance as a positive number. Direct materials quantity variance Direct labor time variance

Answer 1

Solution:

1.)

First we calculate, standard cost for standard quantity:

Standard pounds per 24,000 figures	36,000(25,200/0.70)
Pounds per unit	1.5 per figure (36,000/24,000)
Standard quantity for 21,100 figures	31,650 pounds (1.5 × 21,100)
Standard Cost for standard quantity	$22,155(31,650 ×0.70)

Direct Materials quantity variance =Standard cost - Actual cost

= $22,155 - $ 22,800 =$645 U

Now, we calculate standard labor cost:

Standard labor hours for 24,000 figures	1,680 hrs.(25,200/$15)
Time per figure	0.07(1,680/24,000)
Standard hours for 21,100 figures	1,477 hours (21,100 × 0.07)
Standard labor cost	$22,155(1477 ×$15)

Direct Materials time variance =Standard labor cost - Actual labor cost

= $22,155 - $22,800

=$645 U

Direct Materials quantity variance	$645	Unfavorable
Direct labor time variance	$645	Unfavorable

2.)

a.) Standard Cost = $192 per unit

Standard Cost per unit:

Direct materials (standard quantity × standard price)	16 × $9.50	$152
Direct labor(standard time per unit × standard rate)	2 ×$16	$32
Variable manufacturing overhead (standard time per unit × variable factory overhead standard rate)	2 × $3.20	$6.40
Fixed factory overhead (standard time per unit × factory overhead standard rate)	2 × $0.80	$1.60
Standard Cost per unit		$192

b.)

A Standard Costing system provides Rosa Furniture management a cost control tool using the principle of Management by expection. Using this principle, actual cost deviations from standard can be investigated and corrected.