Question

Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures. Direct materials (15 bs $5 per b) Direct labor (4 hrs.$16 per he.) During June the company incurred the following actual costs to produce 8,500 units Direct materials (130,000 bs.@$4.75 per ib) Direct labor (37,200 hrs@$16.10 per hr S617.500 598.920 AQ Actual Quantity sQ-Standard Quantity AP Actual Price SP Standard Price AH Actual Hours SH Standard Hours AR Actual Rate SR Standard Rate (1) Compute the direct materials price and quantity variances (2) Compute the direct labor rate variance and the direct labor efficiency variance. Indicate whether each variance is favorable or unfavorable Complete this question by entering your answers in the tabs below. Required 1 Reயாd 2 Compute the direct materials price and quantity variances and classify it as favorable or unfavorable. Actual Cost Standard Cost S Required 1 Required 2

Answer 1

Answer

• Requirement 1

Actual Cost								Standard Cost
AQ	x	AP		AQ	x	SP		SQ	x	SP
130,000	x	$                     4.75		130,000	x	$            5.00		127,500	x	$               5.00
	$                    617,500.00				$               650,000.00				$                   637,500.00
Price Variance - Material			$               32,500.00	Quantity Variance - Material			$              12,500.00

Direct material Price Variance	$               32,500.00	Favourable
Direct material Quantity Variance	$               12,500.00	Unfavourable
Total Direct material Variance	$               20,000.00	Favourable

• Requirement 2

Actual Cost								Standard Cost
AH	x	AR		AH	x	SR		SH	x	SR
37,200	x	$                16.10		37,200	x	$    16.00		34,000	x	$              16.00
	$          598,920.00				$     595,200.00				$           544,000.00
Rate Variance - Labor			$         3,720.00	Efficency Variance - Labor			$       51,200.00

Labor Rate Variance	$         3,720.00	Unfavourable
Labor Efficiency Variance	$       51,200.00	Unfavourable
Total Labor Cost [Spending] Variance	$       54,920.00	Unfavourable