Calculating Direct Materials, Direct Labor Variances
Lucky Charm Company makes handcrafted silver charms that attach to jewelry such as a necklace or bracelet. Each charm is adorned with two crystals of various colors. Standard costs follow:
| Standard Quantity | Standard Price (Rate) | Standard Unit Cost |
Direct costs |
|
|
|
Silver | 0.25 oz. | $20.00 per oz. | $ 5.00 |
Crystals | 2 | 0.25 per each | 0.50 |
Direct labor | 1.5 hrs. | 15.00 per hr. | 22.50 |
During the month of January, Lucky Charm made 1,500 charms. The company used 350 ounces of silver (total cost of $7,350) and 3,050 crystals (total cost of $701.50), and paid for 2,400 actual direct labor hours (cost of $34,800).
Required:
1.Calculate Lucky Charm’s direct materials variances for silver and crystals for the month of January.
2. Calculate Lucky Charm’s direct labor variances for the month of January.
3. Identify a possible cause of each variance.
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