Question

Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures. Direct materials (16 lbs. @ $4 per lb.) Direct labor (3 hrs. @ $15 per hr.) $64 45 During June the company incurred the following actual costs to produce 8,900 units. Direct materials (145,000 lbs. @ $3.75 per lb.) Direct labor (31,100 hrs. @ $15.15 per hr.). $543,750 471,165 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

Solution! Standard price 7 Actual price - Standard quantity for production C8900X16) 2 $4 per Ib $3.75 per Ib actual 142,400 Tbs Actual quantity used 145,000 IBS Material price variance! (Standard price - Actual prices x Actual quantity I u-3.75 X 145000 $ 36250 favorable Material quantity Variance! (Standard quantity - Actual quantity) x Standard price [142400-145000 x 4 => $ 10400 unfavorable 2) Standard rate Actual rate standard hours allowed C8900x3) Actual hours worked $ = 15 per hour. $2 15.15 per hour = 26700 hours - 31000 hours.

Page Labor rate Variance! (Standard rate - Actual rate] Actual hours worked [ 15-15.15] x 31000 - $ 4650 unfavorable Labor effeciency variance! Standard hours - Actual hours worked) x Standard rate C26700 - 31000] x 15 = $ 64500 Unfavorable