Question

Direct Materials and Direct Labor Variances At the beginning of June, Kimber Toy Company budgeted 21,000 toy action figures to be manufactured in June at standard direct materials and direct labor costs as follows: $36,750 Direct materials 17,640 Direct labor Total $54,390 The standard materials price is $0.70 per pound. The standard direct labor rate is $12.00 per hour. At the end of June, the actual direct materials and direct labor costs were as follows: Actual direct materials $34,400 Actual direct labor 16,500 Total $50,900 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 Toy Company actually produced 19,100 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 as 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

Data for resource variance

Particulars	Standard			Actual
	Quantity	Rate	Total Cost	Quantity	Rate	Total Cost
Material	47,750 pounds	$ 0.70 per pound	$ 33,425	49,143 pounds	$ 0.70 per pound	34400
Labour	1,337 labour hours	$ 12.00 per labour hour	$ 16,044	1,375 labour hours	$ 12.00 per labour hour	16500

Answer 1)

Material Quantity Variance = (Standard Quantity– Actual Quantity) X Standard Price per unit of input

                                            = (47,750 pounds – 49,143 pounds) X $ 0.70 per pound

                                            = $ 975 (Unfavourable)

Therefore Material Quantity variance is $ 975 (Unfavourable)

Working Notes:

Calculation of Actual price per pound of raw material

Material Price Variance = (Standard Price per pound – Actual Price per pound) X Actual Quantity of material consumed

Since there is no direct material price variance, it is implied that the standard price per pound of raw material (i.e. $ 0.70 per pound) is equal to its actual price per pound.

Therefore actual price of raw material is $ 0.70 per pound.

Calculation of Actual quantity of raw material consumed in production of 19,100 units of output

Actual Quantity consumed = Total Actual cost of raw material/ Actual cost per pound of raw material

                                                  = $ 34,400/ $ 0.70 per pound

                                                  = 49,143 pounds (approximately)

Therefore actual quantity of raw material consumed in production of 19,100 units of output is 49,143 pounds.

Calculation of Standard quantity of raw material consumed for standard production of 21,000 units of output

Standard Quantity consumed = Total Standard cost of raw material/ Standard cost per pound of raw material

                                                  = $ 36,750/ $ 0.70 per pound

                                                  = 52,500 pounds

Therefore standard quantity of raw material consumed in production of 21,000 units of output is 52,500 pounds.

Calculation of Standard quantity of raw material required for actual production of 19,100 units of output

Standard quantity of raw material required for actual output = (Standard quantity of raw material for standard output/ Standard output) X Actual output

                                                   = (52,500 pounds/ 21,000 units) X 19,100 units

                                                   = 47,750 pounds

Therefore standard quantity of raw material required for actual output of 19,100 units is 47,750 pounds

Answer 2)

Labour time Variance = (Standard Labour hours– Actual Labour hours) X Standard labour rate per labour hour

                                            = (1,337 Labour hours – 1,375 Labour hours) X $ 12.00 per Labour hour

                                            = $ 456 (Unfavourable)

Therefore Labour time variance is $ 456 (Unfavourable)

Working Notes:

Calculation of Actual rate per labour hour

Labour Rate Variance = (Standard labour rate per hour – Actual labour rate per hour) X Actual labour hours consumed

Since there is no labour price variance, it is implied that the standard rate per labour hour (i.e. $ 12.00) is equal to its actual rate per labour hour.

Therefore actual rate of labour is $ 12.00 per labour hour

Calculation of Actual labour hours consumed in production of 19,100 units of output

Actual labour hours consumed = Total Actual Direct labour cost/ Actual rate per labour hour

                                                  = $ 16,500/ $ 12.00 per labour hour

                                                  = 1,375 labour hours

Therefore actual labour hours consumed in production of 19,100 units of output are 1,375.

Calculation of Standard labour hours consumed for standard production of 21,000 units of output

Standard labour hours consumed= Total Standard direct labour cost/ Standard rate per direct labour hour

                                                  = $ 17,640/ $ 12.00 per direct labour hour

                                                  = 1,470 labour hours

Therefore standard labour hour consumed in production of 21,000 units of output are 1,470.

Calculation of Standard labour hours required for actual production of 19,100 units of output

Standard labour hours required for actual output = (Standard labour hours for standard output/ Standard output) X Actual output

                                                   = (1,470 labour hours/ 21,000 units) X 19,100 units

                                                   = 1,337 labour hours

Therefore standard labour hours required for actual output of 19,100 units are 1,337.