Exercise 14-26 Direct Materials and Direct Labor Variances [LO 14-3]

Assume that Schmidt Machinery Company had the standard costs reflected in Exhibit 14.5. In a given month, the company used 3,525 pounds of aluminum to manufacture 945 units. The company paid $28.90 per pound during the month to purchase aluminum. At the beginning of the month, the company had 65 pounds of aluminum on hand. At the end of the month, the company had only 40 pounds of aluminum in its warehouse. Schmidt used 5,300 direct labor hours during the month, at an average cost of $41.90 per hour.

Required:

Compute for the month the following variances:

1. The purchase-price variance for aluminum. Indicate whether this variance is favorable (F) or unfavorable (U).

2. The usage variance for aluminum. Indicate whether this variance is favorable (F) or unfavorable (U).

3. The direct labor rate variance. Indicate whether this variance is favorable (F) or unfavorable (U).

4. The direct labor efficiency variance. Indicate whether this variance is favorable (F) or unfavorable (U).