Question

Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures. Direct materials (10 lbs. $3 per lb.) Direct labor (2 hrs. $12 per hr.) points During June the company incurred the following actual costs to produce 9,000 units. Bo Direct materials (92,000 lbs. $2.95 per lb.) Direct labor (18.00 hrs. $12.05 per he.) $271.000 226,340 int P References 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 laborate variance and the direct labor efficiency variance Indicate whether each variance is favorable or unfavorable

Answer 1

1
Actual Cost								Standard Cost
AQ	x	AP		AQ	x	SP		SQ	x	SP
92,000	x	2.95		92,000	x	$3.00		90,000	x	$3.00
	271400				276000				270000
			4600				6000
Direct materials price variance				4600	Favorable
Direct materials quantity variance				6000	Unfavorable
Total direct materials variance				1400	Unfavorable
2
Actual Cost								Standard Cost
AH	x	AR		AH	x	SR		SH	x	SR
18,800	x	$12.05		18,800	x	$12.00		18,000	x	$12.00
	226540				225600				216000
			940				9600
Direct labor rate variance				940	Unfavorable
Direct labor efficiency variance				9600	Unfavorable
Total direct labor variance				10540	Unfavorable