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Lavvy Candy Corporation

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Lavvy Candy Corporation manufactures giant gourmet suckers. The cost standards developed by Lavvy appear below. Manufacturing overhead at Lavvy is applied to production on the basis of standard direct labor-hours:

Standard quantity per sucker Standard cost per ounce or hour Standard cost per sucker
Direct materials............................... 0.75 ounces \$20.00 \$15.00
Direct labor..................................... 1.2 hours \$12.00 14.40
Variable overhead........................... 1.2 hours \$3.00 3.60
Fixed overhead............................... 1.2 hours \$5.00 6.00
Total standard cost per sucker......... \$39.00

The standards above were based on an expected annual volume of 8,000 suckers. The actual results for last year were as follows:

Number of suckers produced............................................ 8,200
Direct labor-hours incurred................................................ 10,000
Ounces of direct materials purchased................................. 7,900
Ounces of direct materials used in production..................... 6,070
Total cost of direct materials purchased............................. \$156,815
Total direct labor cost....................................................... \$122,800

Required:
Compute the following variances for Lavvy.
a. Materials price variance.
b. Materials quantity variance.
c. Labor rate variance.

Solution Preview

Lavvy Candy Corporation manufactures giant gourmet suckers. The cost standards developed by Lavvy appear below. Manufacturing overhead at Lavvy is applied to production on the basis of standard direct labor-hours:

Standard quantity per sucker Standard cost per ounce or hour Standard cost per sucker
Direct materials............................... 0.75 ounces \$20.00 \$15.00
Direct labor..................................... 1.2 hours \$12.00 14.40
Variable overhead........................... 1.2 hours \$3.00 3.60
Fixed overhead............................... 1.2 hours \$5.00 6.00
Total standard cost per sucker......... \$39.00

The standards above were based on an expected annual volume of 8,000 suckers. The actual results for last year were as ...

Solution Summary

This solution is comprised of a detailed explanation to Compute the following variances for Lavvy.
a. Materials price variance.
b. Materials quantity variance.
c. Labor rate variance.