Question

Exercise 21-11 Direct materials and direct labor variances LO P2

Hutto 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.)			$60
Direct labor (3 hrs. @ $16 per hr.)			48

During May the company incurred the following actual costs to produce 8,900 units.

Direct materials (136,300 lbs. @ $3.80 per lb.)		$	517,940
Direct labor (31,300 hrs. @ $16.10 per hr.).			503,930

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.

omplete this question by entering your answers in the tabs below.

• Required 1
• Required 2

Compute the direct materials price and quantity variances and classify it as favorable or unfavorable.

Actual Cost								Standard Cost

omplete this question by entering your answers in the tabs below.

• Required 1
• Required 2

Compute the direct labor rate variance and the direct labor efficiency variance. Indicate whether each variance is favorable or unfavorable.

Actual Cost								Standard Cost

Answer 1

(1)

Direct Materials price variance = (Actual quantity * Actual price) - (Actual quantity * Standard price)

= (136,300 * $3.8) - (136,300 * $4)

= $27,260 Favorable

Direct Materials quantity variance = (Actual quantity * Standard price) - (Standard quantity * Standard price)

= (136,300 * $4) - (8,900 * 15 * $4)

= $11,200 Unfavorable

(2)

Direct Labour rate variance = (Actual hours * Actual rate) - (Actual hours * Standard rate)

= (31,300 * $16.1) - (31,300 * $16)

= $3,130 Unfavorable

Direct Labour efficiency variance = (Actual hours * Standard rate) - (Standard hours * Standard rate)

= (31,300 * $16) - (8,900 * 3 * $16)

= $73,600 Unfavorable