Question

Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures. Direct materials (14 lbs. $5 per lb.) Direct labor (3 hrs. $16 per hr.) $70 48 During June the company incurred the following actual costs to produce 8,800 units. $605,760 482,885 Direct materials (126,200 lbs. e $4.80 per lb.) Direct labor (29,900 hrs. $16.15 per hr.). 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 Complete this question by entering your answers in the tabs below.

Answer 1

a) Direct material variance

Actual Cost								Standard cost
AQ	AP	AQ*AP		AQ	SP	AQ*SP		SQ	SP	SQ*SP
126200	4.8	605760		126200	5	631000		123200	5	616000
			25240				15000
Material price variance				25240	Favorable
Material quantity variance				15000	Unfavorable
Total material variance				10240	Favorable

b) Direct labor variance

Actual Cost								Standard cost
AH	AR	AH*AR		AR	SR	AH*SR		SH	SR	SH*SR
29900	16.15	482885		29900	16	478400		26400	16	422400
			4485				56000
Labor rate variance				4485	Unfavorable
Labor efficiency variance				56000	Unfavorable
Total labor variance				60485	Unfavorable