THE GENERAL VARIANCE MODEL (1) Actual Quantity of Input at Actual Price (AQ X AP) (2) Actual Quantity of Input, at Standard Price (AQ X SP) Standard Quantity Allowed for Actual Output, at Standard Price (SQ X SP) Price Variance (1) - (2) Materials price variance Labor rate variance Variable overhead rate variance Quantity Variance (2) - (3) Materials quantity variance Labor efficiency variance Variable overhead efficiency variance Total variance Price Variance Quantity Variance Variance Analysis Problem: Calculate and explain the direct material and direct labor variances Fuzzy Fabrics manufactures a specialty monogrammed blanket. Listed below are the standard costs for this item: Direct Materials (fabric) 2.0 yards per blanket at $9.50 per yard Direct Labor 0.5 direct labor hours per blanket at $13.00/hour Actual results from last month's production of 2,000 blankets were: Actual cost of 4,800 yards of direct material (fabric) purchased $ 42,240 Actual yards of direct material (fabric) used 4,150 Actual Wages for 1,100 direct labor hours worked $13,420 Requirements: 1. What is the standard direct material cost for one blanket? 2. What is the actual cost per yard of fabric purchased? 3. Calculate the direct material price variance. 4. Calculate the direct material quantity variance. Listed below are the standard costs for this item: Direct Materials (fabric) 2.0 yards per blanket at $9.50 per yard Direct Labor 0.5 direct labor hours per blanket at $13.00/hour Actual results from last month's production of 2,000 blankets were: Actual cost of 4,800 yards of direct material (fabric) purchased $ 42,240 Actual yards of direct material (fabric) used 4,150 Actual Wages for 1,100 direct labor hours worked $13,420 5. What is the standard direct labor cost for one blanket? 6. What is the actual direct labor cost per hour? 7. Calculate the direct labor rate variance. 8. Calculate the direct labor efficiency variance. 9. Analyze each variance and speculate as to what may have caused that variance. 10. Look at all four variances together (the big picture). How might they all be related? What variance is very likely to have caused the other variances