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Direct Material and Direct Labor Variances

The following standards were developed for a line of lightposts:

Standard Inputs Expected
for Each Unit of Output Standard Price per
Achieved Unit of Input
Direct materials 5 pounds $10 per pound
Direct labor 5 hours $25 per hour

During April, 550 lightposts were scheduled for production. However, only 525 were actually produced.

Direct materials purchased and used amounted to 2,750 pounds at a unit price of $8.50 per pound. Direct labor actually paid was $26.00 per hour, and 2,850 hours were used.
1. Compute the standard cost per lightpost for direct materials and direct labor.
2. Compute the price variances and usage variances for direct materials and direct labor.
3. What clues for investigation are provided by the variances?

Solution Preview

The following standards were developed for a line of lightposts:

Standard Inputs Expected
for Each Unit of Output Standard Price per
Achieved Unit of Input
Direct materials 5 pounds $10 per pound
Direct labor 5 hours $25 per hour

During April, 550 lightposts were scheduled for production. However, only 525 were actually produced.

Direct materials purchased and used amounted to 2,750 pounds at a unit price of $8.50 per pound. Direct ...

Solution Summary

This solution is comprised of a detailed explanation to compute the standard cost per lightpost for direct materials and direct labor, compute the price variances and usage variances for direct materials and direct labor, and answer what clues for investigation are provided by the variances.

$2.19