Question

Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures Direct materials (10 lbs. $3 per lb. Direct labor (2 hrs. $12 per hr $30 24 During June the company incurred the following actual costs to produce 9,000 units Direct materials (92,000 lbs $2.95 per 1b. 271,400 226,540 Direct labor (18,800 hr. $12.05 per hr 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

Answer:

Results are below.

Explanation:

To calculate the direct material price and quantity variance, we need to use the following formulas:

Direct material price variance= (standard price - actual price)*actual quantity

Direct material price variance= (3 - 2.95)*92,000

Direct material price variance= $4,600 favorable

Direct material quantity variance= (standard quantity - actual quantity)*standard price

Direct material quantity variance= (10*9,000 - 92,000)*3

Direct material quantity variance= $6,000 unfavorable

To calculate the direct labor efficiency and rate variance, we need to use the following formulas:

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

Direct labor time (efficiency) variance= (2*9,000 - 18,800)*12

Direct labor time (efficiency) variance= $9,600 unfavorable

Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity

Direct labor rate variance= (12 - 12.05)*18,800

Direct labor rate variance= $940 unfavorable