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. @ $3 per lb.)			$45
Direct labor (3 hrs. @ $14 per hr.)			42

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

Direct materials (136,300 lbs. @ $2.70 per lb.)		$	368,010
Direct labor (30,600 hrs. @ $14.15 per hr.).			432,990

AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate

AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price

(1) Compute the direct materials price and quantity variances. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)
(2) Compute the direct labor rate variance and the direct labor efficiency variance. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)
Compute the direct materials price and quantity variances. Indicate whether each variance is favorable or unfavorable.

Actual Cost			0				0	Standard Cost
AQ	x	AP		AQ	x	SP		SQ	x	SP
	x	0			x				x
			$0	0			$0
Direct materials price variance				$0
Direct labor efficiency variance				0

(2) Compute the direct labor rate variance and the direct labor efficiency variance. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)

Actual Cost			0				0	Standard Cost
AQ	x	AP		AQ	x	SP		SQ	x	SP
	x	0			x				x
			$0	0			$0
Direct materials price variance				$0
Direct labor efficiency variance				0

Answer 1