Question

DC Company has set the following standards in order to produce one unit
of product:

                    standard quantity           standard price
direct materials     2.7 yards                  ?? per yard
direct labor         2 hours                    $14 per hour
variable overhead    2 hours                    ?? per hour

During August, DC Company spent $133,770 to purchase direct materials and
had direct labor totaling $189,440. During August, DC Company used 16,000
yards of direct materials in the production of units. DC had 2,500 yards
of materials in its August 1 direct material inventory and had 1,200 yards
yards remaining in its direct materials inventory at August 31.

DC Company reported the following variances for August:

  Direct material price variance ..............  $12,495 unfavorable
  Direct labor rate variance ..................  $24,240 unfavorable
  Total direct labor variance .................  $6,560 favorable
  Variable overhead spending variance .........  $1,900 unfavorable
  Variable overhead efficiency variance .......  $20,900 favorable

Calculate the number of units produced by DC Company in August.

Please Explain

Answer 1

	Actual direct labor costs	$      189,440
Add:	Total direct labor variance	$          6,560
	Standard direct labor costs	$      196,000
Divided by:	Standard labor rate	$                14
	Standard direct labor hours	14,000
Divided by:	Standard direct labor hours per unit	2
	Actual units produced by DC Company in August	7,000

Proof of answer

	Actual direct labor costs	$      189,440
Less:	Direct labor rate variance	$        24,240
	Standard costs of actual hours	$      165,200
Divided by:	Standard labor rate	$                14
	Actaul labor hours	11,800

	minus sign indicate unfavorable variance.
	Measure	Hour
	Standard price per Hour	$            14.00
189440/11800	Actual price per Hour	$            16.05
7000*2	Standard labor Hours	14,000
	Actual labor Hours	11,800
	Standard price per Hour	14.00
Less	Actual price per Hour	-16.05
	Difference	-2.05
Multiply	Actual labor Hours	11800
	Labor price (rate) variance	$       (24,240)
	Indicate	Unfavorable
	Standard labor Hours	14000
Less	Actual labor Hours	-11800
	Difference	2200
Multiply	Standard price per Hour	14.00
	Labor quantity (efficiency) variance	$         30,800
	Indicate	Favorable
	Total direct labor variance (Total of both variance)	$            6,560
	Indicate	Favorable