Question

The following describes production activities of Mercer Manufacturing for the year. Actual direct materials used Actual direct labor used Actual units produced 29,000 lbs. at $5.19 per lb. 8,180 hours for a total of $164,430 48,000 Budgeted standards for each unit produced are 0.50 pound of direct material at $5.05 per pound and 10 minutes of direct laborat $22.00 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

Answer

• Requirement 1

Actual Cost								Standard Cost
AQ	x	AP		AQ	x	SP		SQ	x	SP
29,000	x	$                     5.10		29,000	x	$            5.05		24,000	x	$               5.05
	$                    147,900.00				$               146,450.00				$                   121,200.00
Price Variance - Material			$                 1,450.00	Quantity Variance - Material			$              25,250.00

Direct material Price Variance	$                 1,450.00	Unfavourable
Direct material Quantity Variance	$               25,250.00	Unfavourable
Total Direct material Variance	$               26,700.00	Unfavourable

• Requirement 2

Actual Cost								Standard Cost
AH	x	AR		AH	x	SR		SH	x	SR
8,100	x	$                20.30		8,100	x	$    22.00		8,000	x	$              22.00
	$          164,430.00				$     178,200.00				$           176,000.00
Rate Variance - Labor			$       13,770.00	Efficency Variance - Labor			$         2,200.00

Labor Rate Variance	$       13,770.00	Favourable
Labor Efficiency Variance	$         2,200.00	Unfavourable
Total Labor Cost [Spending] Variance	$       11,570.00	Favourable