Question

At the beginning of June, Kimber Toy Company budgeted 23,000 toy action figures to be manufactured in June at standard direct materials and direct labor costs as follows:
Direct materials $23,000
Direct labor 10,350
Total $33,350
The standard materials price is $0.50 per pound. The standard direct labor rate is $9.00 per hour. At the end of June, the actual direct materials and direct labor costs were as follows:

Actual direct materials $21,100
Actual direct labor 9,500
Total $30,600
There were no direct materials price or direct labor rate variances for June. In addition, assume no changes in the direct materials inventory balances in June. Kimber Toy Company actually produced 20,500 units during June.

Determine the direct materials quantity and direct labor time variances. Round your per unit computations to two decimal places, if required. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Answer 1

Answer:

Direct Material quantity variances = $600 (Favorable)

Direct labor time variances = $279 (Unfavorable)

Explanation:

Requirement A,

We know,

Direct Material quantity variances = (Actual quantity - Standard quantity) × Standard cost per unit

Given,

a) Standard cost per unit = $0.50 per pound

b) Actual Quantity = Actual direct materials ÷ Standard cost per unit

Actual Quantity = $21,100 ÷ $0.50

Actual Quantity = 42,200 pounds.

c) Standard quantity = Actual production ÷ Standard cost per unit = 20,500 toys ÷ $0.50 per pound

Standard quantity = 41,000 pounds

Putting the values into the above formula,

Direct Material quantity variances = (41,000 - 42,200) pounds × $0.50 per pound

Direct Material quantity variances = $600 (Favorable)

As the standard quantity is higher than actual quantity, the company is in favorable condition.

Requirement B

We know,

Direct labor time variances = (Actual Hour - Standard Hour) × Standard labor rate per hour

Given,

a) Standard labor rate per hour = $9.00

b) Actual Hour = Actual direct labor ÷ standard direct labor rate

Actual Hour = $9,500 ÷ $9.00

Actual Hour = 1,056 hours

c) Standard hour = [(Standard Direct labor ÷ standard direct labor rate) ÷ Budgeted production] × Actual production

Standard hour = [($10,350 ÷ $9.00) ÷ 23,000] × 20,500

Standard hour = 1,025 hours

Putting the values into the above formula,

Direct labor time variances = (1,056 - 1,025) hours × $9.00

Direct labor time variances = $279 (Unfavorable)

As the standard hour is lower than actual hour, the company is in unfavorable condition.