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Crystal Charm Company makes handcrafted silver charms that attach to jewelry such as a necklace or bracelet
Crystal Charm Company makes handcrafted silver charms that attach to jewelry such as a necklace or bracelet. Each charm is adorned with two crystals of various colors. Standard costs follow:
Standard Quantity Standard Price (Rate)Standard Unit CostSilver0.25oz. $20.00per oz. $5.00Crystals2 $0.25per crystal 0.50Direct labor1.5hrs. $15.00per hr. 22.50
During the month of January, Crystal Charm made 1,800 charms. The company used 420 ounces of silver (total cost of $9,240) and 3,650 crystals (total cost of $803), and paid for 2,880 actual direct labor hours (cost of $42,480).
Required:
1. Calculate Crystal Charm's direct materials variances for silver and crystals for the month of January.
2. Calculate Crystal Charm's direct labor variances for the month of January.
Expert Solution
1) Calculation of Crystal Charm's direct materials variances for silver and crystals for the month of January:
| Material Price variance = Actual Quantity purchased* (Actual Price - Standard Price) | Sliver | Crystel |
| Actual quantity used | 420 | 3650 |
| Actual rate per unit | 22 | 0.22 |
| Standard rate per unit | 20 | 0.5 |
| Material price variance | 840 | -1022 |
| Favorable | Unfavorable | |
| Material Quantity variance = Standard Price * (Actual Quantity used - Standard Quantity) | Sliver | Crystel |
| Standard rate per unit | 20 | 0.5 |
| Actual quantity used | 420 | 3650 |
| Standard quantity | 450 | 3600 |
| Material quantity variance | -600 | 25 |
| Favorable | Unfavorable |
| Material Price variance = Actual Quantity purchased* (Actual Price - Standard Price) | Sliver | Crystal |
| Actual quantity used | 420 | 3650 |
| Actual rate per unit | =9240/420 | =803/3650 |
| Standard rate per unit | 20 | 0.25 |
| Material price variance | =420*(22-20) | =3650*(0.22-0.25) |
| Unfavorable | Favorable | |
| Material Quantity variance = Standard Price * (Actual Quantity used - Standard Quantity) | Sliver | Crystel |
| Standard rate per unit | 20 | 0.5 |
| Actual quantity used | 420 | 3650 |
| Standard quantity | =1800*0.25 | =1800*2 |
| Material quantity variance | =20*(420-450) | =0.5*(3650-3600) |
| Favorable | Unfavorable |
2) Calculation of Crystal Charm's direct labor variances for the month of January:
| Labor rate variance = Actual hours * (Actual rate-Standard rate) |
| Labor rate variance = 2,880 * (($42,480/2,880) - $15) |
| Labor rate variance = $720 F |
| Labor efficiency variance = Standard rate * (Actual Hours - Standard Hours) |
| Labor efficiency variance = $15 * (2,880 - (1,800*1.50)) |
| Labor efficiency variance = $2,700 U |
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