Milano Leather Goods, Inc. makes one product that is processed through two departments: cutting and accessory. All materials are added in the first department. During the month of January 2016, 8,000 units of the product were made. Standard costs and actual costs for materials and labor are given as follows:
STANDARD COSTS
Raw materials
Raw material: 4 units at $4.75 per unit......................$19.00
Accessory sets: 4 sets at $0.50 per unit.........................2.00
Standard materials cost per unit...............................$21.00
Direct labor
Cutting dept.: 1/10 hour at $12.00 per hour.................$ 1.20
Accessory dept.: 1/4 hour at $16.00 per hour.................4.00
Standard direct labor cost per unit...........................$ 5.20
ACTUAL COSTS
Raw materials
Raw material: 32,600 units at $4.72 per unit.......$153,872.00
Accessory sets: 32,050 sets at $0.52 per unit.........16,666.00
Total actual materials cost............................$170,538.00
Direct labor
Cutting dept.: 830 hours at $12.10 per hour........$ 10,043.00
Accessory dept.: 2,050 hours at $16.10 per hour.....33,005.00
Total actual direct labor cost..........................$ 43,048.00
INSTRUCTIONS
1. Prepare a comparison of the actual cost of materials with the standard cost of materials for the 8,000 units of product. Then prepare an analysis of the materials variances.
2. Prepare a comparison of the actual cost of labor with the standard cost of labor for the 8,000 units of product. Then prepare an analysis of the labor variances.
Analyze:
Is the greatest portion of the total accessory set materials variance attributable to quantity or to price?