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Divertido Company produces single-colored T-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established: Direct materials (2.4 lbs. @ $0.95) Direct labor (0.75 hr. @ $7.40) $2.28 5.55 Standard prime cost $7.83 During the year, 79,500 pounds of material were purchased and used for the changeover activity. There were 30,000 batches produced, with the following actual prime costs: Direct materials Direct labor $65,520 $191,160 (for 22,450 hrs.) Required: Compute the materials and labor variances associated with the changeover activity, labeling each variance as favorable or unfavorable. Material Variances Price variance Usage variance Labor Variances x Favorable 7,125 ✓ Unfavorable Rate variance Unfavorable Efficiency variance 370 ✔ Favorable

Divertido Company produces single-colored T-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established: Direct materials (2.4 lbs. @ $0.95) Direct labor (0.75 hr. @ $7.40) $2.28 5.55 Standard prime cost $7.83 During the year, 79,500 pounds of material were purchased and used for the changeover activity. There were 30,000 batches produced, with the following actual prime costs: Direct materials Direct labor $65,520 $191,160 (for 22,450 hrs.) Required: Compute the materials and labor variances associated with the changeover activity, labeling each variance as favorable or unfavorable. Material Variances Price variance Usage variance Labor Variances x Favorable 7,125 ✓ Unfavorable Rate variance Unfavorable Efficiency variance 370 ✔ Favorable

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Divertido Company produces single-colored T-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established: Direct materials (2.4 lbs. @ $0.95) Direct labor (0.75 hr. @ $7.40) $2.28 5.55 Standard prime cost $7.83 During the year, 79,500 pounds of material were purchased and used for the changeover activity. There were 30,000 batches produced, with the following actual prime costs: Direct materials Direct labor $65,520 $191,160 (for 22,450 hrs.) Required: Compute the materials and labor variances associated with the changeover activity, labeling each variance as favorable or unfavorable. Material Variances Price variance Usage variance Labor Variances x Favorable 7,125 ✓ Unfavorable Rate variance Unfavorable Efficiency variance 370 ✔ Favorable
Transcribed Image Text:Divertido Company produces single-colored T-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established: Direct materials (2.4 lbs. @ $0.95) Direct labor (0.75 hr. @ $7.40) $2.28 5.55 Standard prime cost $7.83 During the year, 79,500 pounds of material were purchased and used for the changeover activity. There were 30,000 batches produced, with the following actual prime costs: Direct materials Direct labor $65,520 $191,160 (for 22,450 hrs.) Required: Compute the materials and labor variances associated with the changeover activity, labeling each variance as favorable or unfavorable. Material Variances Price variance Usage variance Labor Variances x Favorable 7,125 ✓ Unfavorable Rate variance Unfavorable Efficiency variance 370 ✔ Favorable
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