Question

During May, Joliet Fabrics Corporation manufactured 530 units of a special multilayer fabric with the trade name Stylex. The following information from the Stylex production department also pertains to May.

Direct material purchased: 18,300 yards at $1.41 per yard $ 25,803

Direct material used: 9,800 yards at $1.41 per yard 13,818

Direct labor: 2,400 hours at $9.18 per hour 22,032

The standard prime costs for one unit of Stylex are as follows:

Direct material: 20 yards at $1.38 per yard $ 27.60

Direct labor: 4 hours at $9.00 per hour 36.00

Total standard prime cost per unit of output $ 63.60

Required: Compute the following variances for the month of May. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).

Answer 1

Direct material price variance = -$294 Unfavorable

Direct material quantity variance = $1,104 Favorable

Direct material purchase price variance = 549 Unfavorable

Direct labor rate variance = $432 Unfavorable

Direct labor efficiency variance = -$2,520 Unfavorable

Explanation:

The computation of given question is shown below:-

Standard hours = 530 × 4

= 2,120

Direct material price variance = (Standard price - Actual price) × Actual quantity

= ($1.38 - $1.41) × 9,800

= -$0.03 × 9,800

= -$294 Unfavorable

Direct material quantity variance = (Standard quantity - Actual quantity) × Standard price

= (530 × 20 - 9,600) × $1.38

= (10,600 - 9,800) × $1.38

= 800 × $1.38

= $1,104 Favorable

Direct material purchase price variance = (Standard price - Actual price) × Actual quantity

= ($1.38 - $1.41) × 18,300

= -$0.03 × 18,300

= $549 Unfavorable

Direct labor rate variance = (Standard rate - Actual rate) × Actual hours

= ($9 - $9.18) × 2,400

= -$0.18 × 2,400

= $432 Unfavorable

Direct labor efficiency variance = (Standard hours - Actual Hours) × Standard rate

= (2,120 - 2,400) × $9.00

= -280 × $9.00

= -$2,520 Unfavorable