Question
Standard Costs, Decomposition of Budget Variances, Direct Materials and Direct Labor Haversham Corporation produces dress shirts. The company uses a standard costing system and
Standard Costs, Decomposition of Budget Variances, Direct Materials and Direct Labor Haversham Corporation produces dress shirts. The company uses a standard costing system and has set the following standards for direct materials and direct labor (for one shirt): Fabric (1.5 yds. @ $2.80) Direct labor (1.1 hr. @ $20) Total prime cost $4.20 22.00 $26.20 During the year, Haversham produced 9,500 shirts. The actual fabric purchased was 14,150 yards at $2.72 per yard. There were no beginning or ending inventories of fabric. Actual direct labor was 10,570 hours at $19.60 per hour. Required: 1. Compute the costs of fabric and direct labor that should have been incurred for the production of 9,500 shirts. Direct materials Direct labor 2. Compute the total budget variances for direct materials and direct labor. Direct materials Direct labor 3. Break down the total budget variance for direct materials into a price variance and a usage variance. Materials Price Variance Materials Usage Variance
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