Question

Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures Direct materials (15 lbs. $4 per lb.) Direct labor (2 hrs.@ $14 per hr.) $60 28 During June the company incurred the following actual costs to produce 9,000 units Direct materials (137,400 lbs. $3.70 per lb.) Direct labor (22,800 hrs. $14.20 per hr. $508,38 323,760 AQActual Quantity SQ Standard Quantity AP Actual Price SP Standard Price AHActual 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 Complete this question by entering your answers in the tabs below Required Required 2 Compute the direct materials price and quantity variances and classify it as favorable or unfavorable Actual Cost Standard Cost Required 1 Required 2 >

2)

Answer 1

Direct material variance :

Actual Cost								Standard Cost
AQ	AP	AQ*AP		AQ	SP	AQ*SP		SQ	SP	SQ*SP
137400	3.70	508380		137400	4	549600		135000	4	540000
			41220				9600
Material price variance				41220	Favorable
Material quantity variance				9600	Unfavorable
Total material variance				31620	Favorable

Direct labour variance :

Actual Cost								Standard Cost
Ah	AR	AH*AR		AH	SR	AH*SR		SH	SR	Sh*SR
22800	14.20	323760		22800	14	319200		18000	14	252000
			4560				67200
labour rate variance				4560	Unfavorable
labour efficiency variance				67200	Unfavorable
Total labour variance				71760	Unfavorable