Question

Crystal 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
Silver 0.40 oz. $23.00 per oz. $9.20
Crystals 5.00 $0.40 crystal 2.00
Direct labor 2.00 hrs. $12.00 per hr. 24.00
During the month of January, Crystal Charm made 1,530 charms. The company used 577 ounces of silver (total cost of $13,848) and 7,700 crystals (total cost of $2,926.00), and paid for 3,210 actual direct labor hours (cost of $36,915.00).
Required:
1. Calculate Crystal Charm’s direct materials variances for silver and crystals for the month of January.
2. Calculate Crystal Charm’s direct labor variances for the month of January.

Answer 1

Answer and Explanation:

The computation is shown below:

1.

Direct Material Price Variance = Actual material cost - Actual Quantity × Standard Price

For Silver

= $13848 - 577 × 23

= $577 (U)

For Crystal

= $2926 - 7700 × 0.40

= $154 (F)

Direct Material Quantity Variance = (Actual Quantity - Standard Quantity) × Standard Price

For Silver

= (577 - 1530 × 0.40) × 23

= $805 (F)

For Crystal

= (7700 - 1530 × 5) × 0.40

= $20 (U)

2.

Direct Labor Rate Variance = Actual Cost - Actual Hours × Standard Rate

= $36915 - 3210 × 12

= $1605 (F)

And,

Direct Labor efficiency Variance = (Actual hours - Standard hours) × Standard Rate

= (3210 - 1530 × 2) × 12

= $1800 (U)