Question

Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures.

Direct materials (16 lbs. @ $4 per lb.) $64

Direct labor (2 hrs. @ $15 per hr.) 30

During June the company incurred the following actual costs to produce 8,700 units.

Direct materials (141,300 lbs. @ $3.80 per lb.) $ 536,940

Direct labor (20,600 hrs. @ $15.15 per hr.). 312,090 AH = Actual Hours SH = Standard Hours AR = Actual Rate SR = Standard Rate AQ = Actual Quantity SQ = Standard Quantity AP = Actual Price SP = Standard Price

(1) Compute the direct materials price and quantity variances. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)
(2) Compute the direct labor rate variance and the direct labor efficiency variance. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2

Compute the direct materials price and quantity variances. Indicate whether each variance is favorable or unfavorable.

	Actual Cost 0 0 Standard Cost 0 $0 0 $0 $0 0

Compute the direct labor rate variance and the direct labor efficiency variance. Indicate whether each variance is favorable or unfavorable.

	Actual Cost Standard Cost 0 $0 $0 $0 0

• Required 1

Answer 1

Compute the direct materials price and quantity variances. Indicate whether each variance is favorable or unfavorable.

	Actual Cost 0 0 Standard Cost AQ AP AQ*AP AQ SP AQ*SP SQ SP SP*SQ 141300 3.80 536940 141300 4 565200 139200 4 556800 $28260 0 $8400 Material price variance $28260 Favorable Material quantity variance 8400 Unfavorable Total material variance 19860 Favorable

Compute the direct labor rate variance and the direct labor efficiency variance. Indicate whether each variance is favorable or unfavorable.

	Actual Cost Standard Cost AH AR AH*AR AH SR AH*SR SH SR SH*SR 20600 15.15 312090 20600 15 309000 17400 15 261000 $3090 $48000 Labor rate variance $3090 Unfavorable Labor efficiency variance 48000 Unfavorable Total labor variance 51090 Unfavoable

• Required 1