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Materials and Labor Variances Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given
Materials and Labor Variances Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established: Direct materials (2.4 lbs. @ $0.95) Direct labor (0.75 hr. @ $7.40) Standard prime cost $2.28 5.55 $7.83 During the year, 79,500 pounds of material were purchased and used for the changeover activity. There were 30,000 batches produced, with the following actual prime costs: Direct materials Direct labor $68,040 $192,794 (for 22,450 hrs.) Required: Compute the materials and labor variances associated with the changeover activity, labeling each variance as favorable or unfavorable. Material Variances Price variance Usage variance 7,485 Favorable Unfavorable changeover for a given batch have been established: Direct materials (2.4 lbs. @ $0.95) Direct labor (0.75 hr. @ $7.40) Standard prime cost $2.28 5.55 $7.83 During the year, 79,500 pounds of material were purchased and used for the changeover activity. There were 30,000 batches produced, with the following actual prime costs: Direct materials Direct labor $68,040 $192,794 (for 22,450 hrs.) Required: Compute the materials and labor variances associated with the changeover activity, labeling each variance as favorable or unfavorable. Material Variances Price variance Usage variance Labor Variances Rate variance Efficiency variance 7,485 Favorable Unfavorable 100
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