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Material and labor variances

The Derry-O Company has the following standard cost for their product:

Direct materials 3 yards at $12.50 per yard $37.50 per unit
Direct labor 2 hours at $9 per hour $18.00 per unit

During the prior year, the company produced 4,900 units and 15,000 yards of material were purchased and used in production at $12.40 per yard. The average labor rate was $9.10 and 10,050 hours were worked.

Required:

1. Calculate the direct material price variance.
2. Calculate the direct material usage variance.
3. Calculate the direct labor rate variance.
4. Calculate the direct labor efficiency variance.

Solution Preview

1. Calculate the direct material price variance.

Material price variance = (Actual Price - Standard Price) Actual quantity purchased
= (12.40 - 12.50) 15,000 yards = 1,500 F as actual price is lower

2. Calculate the direct material usage variance.

Material usage ...

Solution Summary

The solution explains how to calculate material and labor variances

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