Question

1.

Exercise 21-12 Direct materials and direct labor variances LO P3 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.) $60

Direct labor (2 hrs. @ $14 per hr.) 28

During June the company incurred the following actual costs to produce 8,500 units.

Direct materials (130,500 lbs. @ $3.80 per lb.) $ 495,900

Direct labor (21,900 hrs. @ $14.15 per hr.). 309,885

(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.)

2.

Exercise 21-11 Direct materials and direct labor variances LO P3

Hutto 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 (4 hrs. @ $15 per hr.) 60

During May the company incurred the following actual costs to produce 9,000 units.

Direct materials (138,000 lbs. @ $2.80 per lb.) $ 386,400

Direct labor (40,400 hrs. @ $15.10 per hr.). 610,040

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. Round "Rate per hour" answers to 2 decimal places.)

Answer 1

Answer:- 1)-Direct Material price variance= $26100 F.

Direct Material Quantity variance = $12000 U.

Explanation- Material price variance = (Standard price – Actual price) * Actual quantity purchased

= ($4.00 per lb. - $3.80 per lb.)*130500 lbs.   

= $26100 Favorable

Material Quantity variance = (Standard Quantity- Actual Quantity)*Standard price

= (127500 lbs. – 130500 lbs.)*$4.00 per lbs.

= $12000 Unfavorable

Where- Standard Quantity = No. of lb. per unit*Actual output

= 15 lbs. per unit *8500 units

= 127500 lbs

Labor rate variance =$3285 U.

Labor time variance = $68600 U.

Explanation- Direct Labor rate variance = (Standard rate – Actual rate) * Actual hours

= ($14.00 per hour - $14.15 per hour)* 21900 hours   

= $3285 Unfavorable

Direct Labor Time variance=(Standard hours-Actual hours)*Standard rate per hour

=(17000 hours – 21900 hours)*$14 per hour

= $68600 Unfavorable

Where- Standard Hours = No. of hours per unit*Actual output

= 2 hours per unit *8500 units

= 17000 hours

Answer:- 2)-Direct Material price variance= $27600 F.

Direct Material Quantity variance = $9000 U.

Explanation- Material price variance = (Standard price – Actual price) * Actual quantity purchased

= ($3.00 per lb. - $2.80 per lb.)*138000 lbs.   

= $27600 Favorable

Material Quantity variance = (Standard Quantity- Actual Quantity)*Standard price

= (135000 lbs. – 138000 lbs.)*$3.00 per lbs.

= 9000 Unfavorable

Where- Standard Quantity = No. of lb. per unit*Actual output

= 15 lbs. per unit *9000 units

= 135000 lbs

Labor rate variance =$4040 U.

Labor time variance = $66000 U.

Explanation- Direct Labor rate variance = (Standard rate – Actual rate) * Actual hours

= ($15.00 per hour - $15.10 per hour)* 40400 hours   

= $4040 Unfavorable

Direct Labor Time variance=(Standard hours-Actual hours)*Standard rate per hour

=(36000 hours – 40400 hours)*$15 per hour

= $66000 Unfavorable

Where- Standard Hours = No. of hours per unit*Actual output

= 4 hours per unit *9000 units

= 36000 hours