Question

Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established: Direct materials (2.4 lbs. $0.95) $2.28 Direct labor (0.75 hr. $7.40) 5.55 Standard prime cost $7.83 During the year, 79,500 pounds of material were purchased and used for the changeover activity. There were 30,000 batches produced, with the following actual prime costs: $72,450 Direct materials Direct labor $184,625 (for 22,450 hrs.) Required: Compute the materials and bor variances associated with the changeover activity, labeling each variance as favorable or unfavorable Material Variances Price variance Favorable Usage variance Unfavorable Labor Variances Rate variance Unfavorable

Answer 1

Answer)

Material price variance:

(Standard price×actual quantity)-actual price

=($0.95×79500lbs)-$72450

=$3075

Material usage variance:

(Standard quantity for actual output-actual quantity)×standard price

=((30000 batches×2.4 lbs)-79500lbs)×$0.95

=$7125 Unfavorable

Labour rate Variance:

(Standard rate×actual hours)-actual rate

=($7.40×22450 hours)-$184625

=$18495 Unfavorable

Labour efficiency variance:

=((Standard hours for actual hours)-actual hours)×standard rate

=((30000 batch×0.75 hours)-22450)×$7.40

=$370 favorable