Question

Exercise 08-15 Direct materials and direct labor variances LO P3 The following describes production activities of Mercer Manufacturing for the year. 34,000 lbs. at $5.95 per lb 10,600 hours for a total of $220,480 Actual direct materials used Actual direct labor used Actual units produced 63,300 Budgeted standards for each unit produced are 0.50 pound of direct material at $5.90 per pound and 10 minutes of direct labor at $21.80 per hour. 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 and classify each as favorable or unfavorable. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance. Round "Cost per unit" answers to 2 decimal places.) (2) Compute the direct labor rate and efficiency variances and classify each as favorable or unfavorable. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)

Answer 1

Actual Cost х AP AQ 34000 Standard Cost SQL X 31650 X 186735 AQL XL SP 34000 5.90 200600 SP 5.90 5.95 202300 1700 13865 Direct Material Price Varaince Direct Material Quantity Varaince Total Direct Material Varaince 1700 13865 15565 Unfavorable Unfavorable Unfavorable X Actual Cost AH X 10600 X 220480 AR 20.80 AH 10600 SR 21.80 Standard Cost SH X 10550 X 229990 SR 21.80 231080 10600 1090 Direct Labor Rate Varaince Direct Labor Efficiency Variance Total Direct Labor Variance AH = (220480/10600)= 20.80 SH= ( 63300*1/6))= 10550 10600 1090 9510 Favorable Unfavorable Favorable