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Direct Materials and Direct Labor Variances

Dulce Company produces a popular candy bar called Rico. Thecandy is produced in Costa Rica and exported to the United States.Recently, the company adopted the following standards for one5-ounce bar of the candy:

Direct materials (5.5 oz. @ $0.04) $0.22
Direct labor (0.05 hr. @ $2.60) 0.13
Standard prime cost $0.35

During the first week of operation, the company experienced thefollowing actual results:

Bars produced: 100,000.

Ounces of direct materials purchased: 570,000 ounces at $0.045.

There are no beginning or ending inventories of direct materials.

Direct labor: 5,200 hours at $2.55.

You may use the attached spreadsheet to solve this activity. Youwill find the spreadsheet by clicking on the paper clip found inthe upper left hand corner of the screen.

Required:

1. Compute price and usage variances for direct materials. Entervariance as a positive number and select Favorable or Unfavorable.

2. Compute the rate variance and the efficiency variance for directlabor. Enter variance as a positive number and select Favorable or Unfavorable.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9797291

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