Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established:
Materials and Labor Variances
Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established:
Direct materials (2.4 lbs. @ $0.95).............................$2.28
Direct labor (0.75 hr. @ $7.40).....................................5.55
Standard prime cost....................................................$7.83
During the year, 79,500 pounds of material were purchased and used for the changeover activity. There were 30,000 batches produced, with the following actual prime costs:
Direct materials......................................................$ 63,000
Direct labor.................................$163,385 (for 22,450 hrs)
Required:
Compute the materials and labor variances associated with the changeover activity, labeling each variance as favorable or unfavorable.