Question

Exercise 21-12 Direct materials and direct labor variances LO P2

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. @ $14.00 per hr.)			42

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

Direct materials (130,400 lbs. @ $2.75 per lb.)		$	358,600
Direct labor (29,900 hrs. @ $14.15 per hr.).			423,085

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.

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

Required 1

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

Actual Cost

1)

2)

3)

$

___________

1)

2)

3)

Standard Cost

1)

2)

3)

$

________________

________________

_________________

Required 2

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

Actual Cost

1)

2)

3)

$

__________________

1)

2)

3)

Standard Cost

1)

2)

3)

$

______________

______________

_______________

Answer 1

1)	Actual Cost								Standard Cost
	AQ	x	AP		AQ	x	SP		SQ	x	SP
	130400		$                       2.75		130400		$            3.00		127500		$            3.00
		$       3,58,600				$    3,91,200				$   3,82,500
	Direct material price variance =		$                  32,600		Favorable
	Direct material quantity variance =		$                    8,700		Unfavorable
	Total direct materials variance =		$                  23,900		Favorable
2)	Actual Cost								Standard Cost
	AH	x	AR		AH	x	SR		SH	x	SR
	29900		$                    14.15		29900		$          14.00		25500		$         14.00
		$       4,23,085				$    4,18,600				$   3,57,000
	Direct labor rate variance =		$                    4,485		Unfavorable
	Direct labor efficiency variance =		$                  61,600		Unfavorable
	Total direct labor variance =		$                  66,085		Unfavorable