Question

Check my work Exercise 21-15 Direct materials and direct labor variances LO P2 The following information describes production activities of Mercer Manufacturing for the year. points Skipped Actual direct materials used 25,000 lbs. at $4.60 per lb. Actual direct labor used 6,050 hours for a total of $120,395 Actual units produced 36,000 eBook Hint Print Budgeted standards for each unit produced are 0.50 pounds of direct material at $4.55 per pound and 10 minutes of direct labor at $20.90 per hour. 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 labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable. IMC Graw < Prev 6 of 6 Next > Hill

Answer 1

Material Variances
Std			Actual			Revised Std
SQ	SP	Total	AQ	AP	Total	RSQ	P.u	RSP
0.5	$                    4.50	$           2.25	25000	$                4.60	$ 1,15,000.00	18000	4.5	81000
Direct Matrial Price Variance
=	AQ(SP-AP)
=	25000(4.5-4.6)
=	-$            2,500.00	(U)	Unfavourable Variance		i.e. Actual Price is higher than Standard price
Direct Matrial Price Variance
=	SP(SQ-AQ)
=	4.5(18000-25000)
=	-$          31,500.00	(U)	Unfavourable Variance		i.e Actual qty used to produce output is higher than Budgeted.
Direct Matrial Total Cost Variance
=	(RSQ*SP)-(AQ*AP)
=	81000-115000
=	-$          34,000.00	(U)	Unfavourable Variance
Labour Variances
Std			Actual			Revised Std
SH	SR	Total	AH	AR	Total	RSH	P.u	RSR
0.166666667	$                  20.90	$           3.48	6050	$              19.90	$ 1,20,395.00	6000	$   20.90	$ 1,25,400.00
Direct Labour Rate Variance
=	AH(SR-AR)
=	6050(20.90-19.90)
=	$            6,050.00	(F)	Favourable Vaiance			(A)
Direct Labour efficiency Variance
=	SR(RSH-AH)
=	20.90(6000-6050)
=	-$            1,045.00	(U)	Unfavourable			(B)
Direct Labour total cost Variance
=	RSR-AR
=	125400-120395
=	$            5,005.00	(F)	Favourable Vaiance			(A-B)