During June, Danby Company's material purchases amounted to 7,000 pounds at a price of $7.50 per pound. Actual costs incurred in the production of 1,500 units were as follows: Direct labor: Direct material: $ 119,325 Direct Labor: $ 36,000 The standards for one unit of Danby Company's product are as follows: Quantity, 4 hours per unit ($18.50 per hour) Rate, $18.40 per hour ($7.50 per pound) Direct Material: Quantity, 3 pounds per unit Price, $7.20 per pound Required: Compute the direct-material price and quantity variances, the direct-material purchase price variance, and the direct- labor rate and efficiency variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)
During June, Danby Company's material purchases amounted to 7,000 pounds at a price of $7.50 per pound. Actual costs incurred in the production of 1,500 units were as follows: Direct labor: Direct material: $ 119,325 Direct Labor: $ 36,000 The standards for one unit of Danby Company's product are as follows: Quantity, 4 hours per unit ($18.50 per hour) Rate, $18.40 per hour ($7.50 per pound) Direct Material: Quantity, 3 pounds per unit Price, $7.20 per pound Required: Compute the direct-material price and quantity variances, the direct-material purchase price variance, and the direct- labor rate and efficiency variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:During June, Danby Company's material
purchases amounted to 7,000 pounds at a
price of $7.50 per pound. Actual costs
incurred in the production of 1,500 units
were as follows:
Direct
labor:
Direct
material:
$ 119,325
Direct Labor:
$ 36,000
The standards for one unit of Danby
Company's product are as follows:
Quantity, 4 hours
per unit
($18.50 per
hour)
Rate, $18.40 per
hour
($7.50 per
pound)
Direct Material:
Quantity, 3 pounds
per unit
Price, $7.20 per
pound
Required:
Compute the direct-material price and
quantity variances, the direct-material
purchase price variance, and the direct-
labor rate and efficiency variances.
(Indicate the effect of each variance by
selecting "Favorable" or "Unfavorable".
Select "None" and enter "0" for no effect
(i.e., zero variance).)
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