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. @ $3 per lb.) $42 Direct labor (3 hrs. @ $16 per hr.) 48 During June the company incurred the following actual costs to produce 8,200 units. Direct materials (117,600 lbs. @ $2.80 per lb.) $ 329,280 Direct labor (29,100 hrs. @ $16.20 per hr.). 471,420 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.) Next

• 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
		0
			$0				$0
				$0
				0

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
				$0
				0

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
				$0
				0

Actual Cost			0				0	Standard Cost
AQ	x	AP		AQ	x	SP		SQ	x	SP
	x	0			x				x
			$0	0			$0
				$0
				0

Answer 1

(1) Compute the direct materials price and quantity variances.

Actual Cost							0	Standard Cost
AQ	x	AP		AQ	x	SP		SQ	x	SP
117600	x	$2.80		117600	x	$3.00		114800	x	$3.00
	$329280				$352800				$344400
			$23520	0			$8400
Direct materials price variance				$23520	Favorable
Direct materials quantity variance				$8400	Unfavorable
Total direct materials variance				$15120	Favorable

Standard quantity= 8200 units*14 lbs= 114800

(2) Compute the direct labor rate variance and the direct labor efficiency variance.

Actual Cost								Standard Cost
AH	x	AR		AH	x	SR		SH	x	SR
29100	x	$16.20		29100	x	$16.00		24600	x	$16.00
	$471420				$465600				$393600
			$5820				$72000
Direct labor rate variance				$5820	Unfavorable
Direct labor efficiency variance				$72000	Unfavorable
Total direct labor variance				$77820	Unfavorable

Standard hour= 8200 units*3 hrs= 24600