Question

Hutto Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures. $60 42 Direct materials (15 lba. e $4 per lb.) Direct labor (3 hrs. e $14 per hr.) During May the company incurred the following actual costs to produce 8,800 units. Direct materials (134,700 lbs. $3.80 per lb.) Direct labor (30,000 hrs. $14.10 per hr.). $511,860 423,000 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 variance and the direct labor efficiency variance. Indicate whether each variance is favorable or unfavorable.

Answer 1

Answer
Requirement-1
Actual Cost								Standard Cost
AQ	x	AP		AQ	x	SP		SQ	x	SP
134,700	x	$3.80		134,700	x	$4.00		132,000	x	$4
	$511,860				$538,800				$528,000
			$26,940				$10,800
Direct materials price variance				$26,940	Favorable
Direct materials quantity variance				$10,800	Unfavorable
Total direct materials variance				$16,140	Favorable
Requirement-2
Actual Cost								Standard Cost
AH	x	AR		AH	x	SR		SH	x	SR
30,000	x	$14.10		30,000	x	$14		26,400	x	$14
	$423,000				$420,000				$369,600
			$3,000				$50,400
Direct labor rate variance				$3,000	Unfavorable
Direct labor efficiency variance				$50,400	Unfavorable
Total direct labor variance				$53,400	Unfavorable
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