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Direct Material and Direct Labor Variances
Dauterive Co. manufacturers wooden pen and pencil holders. The
following material and labor standards have been set for one holder.
5 ounces of wood at $0.50 per ounce $2.50
4 minutes of labor time at $9.00 per hour 0.60
During July, the company incurred the following costs to manufacture 46,800 holders.
14,250 pounds of wood at $8.30 per pound $118,275
3,840 hours of labor time at $9.25 per hour 35,520
a. What is the standard quantity of material allowed for the actual production?
b. Compute the material price and quantity variances.
c. What are the standard hours of labor time allowed for the actual production?
d. Compute the labor rate and efficiency variances.
e. What relationship might exist between the material price variance and the material usage and labor efficiency variances?
f. What relationship might exist between the labor rate variance and the labor efficiency variance?