Question

Reed corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures.

direct materials (16lbs. @$3 per lb) $48
direct labor (3hr @$16.00 per unit) $48

during june the company incurred the following actual costs to produce 8,700 units.
Direct materials (141,500lbs @$2.80 per lb)    $396,200
direct labor (30,700 hrs. @$16.15 per hr.) $495,805

Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures. $48 Direct materials (16 lbs. @ $3 per lb.) Direct labor (3 hrs. @ $16.00 per hr.) During June the company incurred the following actual costs to produce 8,700 units. Direct materials (141,500 lbs. @ $2.80 per lb.) Direct labor (30,700 hrs. @ $16.15 per hr.). $396, 209 495,805 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

Actual Cost AQ 141500 AP 2.80 AQ 141500 X X 424500 SP 3.00 Standard Cost SQ 139200 X 417600 SP 3.00 X 396200 28300 6900 Direct Material Price Varaince Direct Material Quantity Varaince Total Direct Material Varaince 28300 6900 21400 favorable Unfavorable favorable