Material and labor variances
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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.
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Solution Summary
The solution explains how to calculate material and labor variances
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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 ...
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