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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

\$2.19