At the beginning of June, Veneskey Printing Company budgeted 19,200 books to be printed in June at standard direct materials

At the beginning of June, Veneskey Printing Company budgeted 19,200 books to be printed in June at standard direct materials and direct labor costs as follows:

Direct materials $36,000

Direct labor 26,880

Total $62,880

The standard materials price is $1.25 per pound. The standard direct labor rate is $14.00 per hour. At the end of June, the actual direct materials and direct labor costs were as follows:

Actual direct materials $34,500

Actual direct labor 24,500

Total $59,000

There were no direct materials price or direct labor rate variances for June. In addition, assume no changes in the direct materials inventory balances in June. Veneskey Printing Company actually produced 18,000 units during June.

Determine the direct materials quantity and direct labor time variances.

Answer:

Step 1:  Determine the standard direct materials and direct labor per unit. 

Standard direct materials quantity per unit: 

Direct materials lbs. budgeted for June: 

$36,000 

$1.25 per lb. 

=  28,800 lbs. 

Standard pounds per unit: 

28,800 lbs. 

19,200 units 

=  1.5 standard lbs. per unit 

Standard direct labor time per unit: 

Direct labor hrs. budgeted for June: 

$26,880 

$14.00 per hr. 

=  1,920 direct labor hrs. 

Standard direct labor hrs. per unit: 

1,920 hrs. 

19,200 units 

=  0.10 standard direct labor hr. per unit 

Step 2:  Using the standard quantity and time rates in step 1, determine the 

standard costs for the actual June production. 

Standard direct materials at actual volume: 

18,000 units × 1.5 lbs. per unit × $1.25…………………………………………… $33,750 

Standard direct labor at actual volume: 

18,000 units × 0.10 direct labor hr. per unit × $14.00…………………………    25,200 

Total………………………………………………………………………………………… $58,950 

Step 3:  Determine the direct materials quantity and direct labor time variances, 

assuming no direct materials price or direct labor rate variances. 

Actual direct materials used in production………………………………………… $34,500 

Standard direct materials (step 2)……………………………………………………   33,750 

Direct materials quantity variance—unfavorable*………………………………… $  750 

* (27,600 lbs. – 27,000 lbs.) × $1.25 = 750 U 

$34,500 ÷ $1.25 = 27,600 lbs. 

$33,750 ÷ $1.25 = 27,000 lbs. 

Actual direct labor……………………………………………………………………… $24,500 

Standard direct labor (step 2)…………………………………………………………   25,200 

Direct labor time variance—favorable**…………………………………………… $    (700) 

** 18,000 units × 0.10 hr. = 1,800 standard hrs. 

$24,500 ÷ $14.00 = 1,750 actual hrs. 

(1,750 hrs. – 1,800 hrs.) × $14.00 = –$700 F