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.