Question

Exercise 21-15 Direct materials and direct labor variances LO P2 The following information describes production activities of Mercer Manufacturing for the year. Actual direct materials used Actual direct labor used Actual units produced 27,000 lbs. at $4.75 per lb. 8,600 hours for a total of $172,860 51,000 Budgeted standards for each unit produced are 0.50 pounds of direct material at $4.70 per pound and 10 minutes of direct labor at $21.00 per hour. 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 and efficiency variances. Indicate whether each variance is favorable or unfavorable. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the direct materials price and quantity variances. (Do not round intermediate calculations.) Actual Cost Standard Cost Required 1 Required 2 >

Answer 1

Answers

• [1]

Actual Cost								Standard Cost
AQ	x	AP		AQ	x	SP		SQ	x	SP
27,000	x	$                     4.75		27,000	x	$            4.70		25,500	x	$               4.70
	$                    128,250.00				$               126,900.00				$                   119,850.00
Price Variance - Material			$                 1,350.00	Quantity Variance - Material			$                 7,050.00

Direct material Price Variance	$                 1,350.00	Unfavourable
Direct material Quantity Variance	$                 7,050.00	Unfavourable
Total Direct material Variance	$                 8,400.00	Unfavourable

• [2]

Actual Cost								Standard Cost
AH	x	AR		AH	x	SR		SH	x	SR
8,600	x	$                20.10		8,600	x	$    21.00		8,500	x	$              21.00
	$          172,860.00				$     180,600.00				$           178,500.00
Rate Variance - Labor			$         7,740.00	Efficency Variance - Labor			$         2,100.00

Labor Rate Variance	$         7,740.00	Favourable
Labor Efficiency Variance	$         2,100.00	Unfavourable
Total Labor Cost [Spending] Variance	$         5,640.00	Favourable