Question

the direct materials and direct labour standards for one bottle of clean-all spray cleaner are given below: standard quantity or hours standard price or rate standard cost direct materials 5.0 millilitres $ 0.33 per millilitre $ 1.65 direct labour 0.2 hours $ 12.00 per hour $ 2.40 during the most recent month, the following activity was recorded: 29,500 millilitres of material was purchased at a cost of $0.28 per millilitre. all of the material was used to produce 2,800 bottles of clean-all. 750 hours of direct labour time was recorded at a total labour cost of $9,000. assume that instead of producing 2,800 bottles of clean-all during the month, the company produced only 2,000 bottles, using 25,500 millilitres of material. (the rest of the material purchased remained in raw materials inventory.)

Answer 1

The question requires the calculation of variances for direct materials and direct labour compared to standard costs, which is important for cost control in production. The calculations on comparing the standard quantity and rate against actual usage and cost.

Step-by-step explanation:

The student's question involves the calculation of standard cost variances for direct materials and direct labour based on standards set for the production of clean-all spray cleaner. When the actual production and costs are different from the standards, it is essential to find out the variances to understand the cost performance of the company.

Direct Materials Variance

The standard cost for direct materials is calculated by multiplying the standard quantity expected to produce one bottle (5.0 millilitres) by the standard price ($0.33 per millilitre), which equals $1.65 per bottle. During the month, 29,500 millilitres of material was purchased, but only 25,500 millilitres were used to produce 2,000 bottles of cleaner. This quantity variance needs to be calculated based on standard and actual usage.

Direct Labour Variance

The standard cost for direct labour is calculated by multiplying the standard labour hours for one bottle (0.2 hours) by the standard labour rate ($12.00 per hour), which equals $2.40 per bottle. However, the company recorded 750 hours of direct labour at a total labour cost of $9,000. To determine the labour variance, one would compare the standard cost with the actual cost and hours worked.

In both cases, variances should be calculated to determine areas where the business might need to control costs better or revise their standards. Understanding these variances is crucial for cost control and efficient production management.