Question

During June, Danby Company’s material purchases amounted to 6,800 pounds at a price of $8.10 per pound. Actual costs incurred in the production of 2,400 units were as follows: Direct labor: $ 137,025 ($18.90 per hour) Direct material: $ 40,500 ($8.10 per pound) The standards for one unit of Danby Company’s product are as follows: Direct Labor: Direct Material: Quantity, 3 hours per unit Quantity, 2 pounds per unit Rate, $18.80 per hour Price, $7.80 per pound Required: Compute the direct-material price and quantity variances, the direct-material purchase price variance, and the direct-labor rate and efficiency variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

During June, Danby Company’s material purchases amounted to 6,800 pounds for $8.10 per pound. Costs incurred in the production of 2,400 units.

The standards for one unit of Danby Company’s product are as follows: 2 pounds per unit, $7.80 per pound.

Direct material price variance= (standard price - actual price)*actual quantity

Direct material price variance= (7.8 - 8.1)*6,800= $2,040 unfavorable

Direct material quantity variance= (standard quantity - actual quantity)*standard price

Standard quantity= 2,400 units*2 pounds= 4,800 punds

Actual quantity= 40,500/8.10= 5000 pounds

Direct material quantity variance= (4,800 - 5,000)*7.8= $1,560 unfavorable

Purchase variance= 7.80 - 8.10= $0.30 unfavorable

Standard labor costs:

Direct labor: $ 137,025 ($18.90 per hour); 2,400 units.

Actual:

3 hours per unit; $18.80 per hour.

Direct labor efficiency variance= (SQ - AQ)*standard rate

Direct labor efficiency variance= (7,200 - 7,250)*18.80= $940 unfavorable

Direct labor price variance= (SR - AR)*AQ

Direct labor price variance= (18.80 - 18.90)*7,250= $725 unfavorable