Question

The following information describes production activities of Mercer Manufacturing for the year.

Actual direct materials used	19,000 lbs. at $4.25 per lb.
Actual direct labor used	5,560 hours for a total of $107,308
Actual units produced	30,090

Budgeted standards for each unit produced are 0.50 pounds of direct material at $4.20 per pound and 10 minutes of direct labor at $20.40 per hour.

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 and efficiency variances. 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. (Do not round intermediate calculations.)

	Actual Cost Standard Cost ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?

Required 2

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

Compute the direct labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable. (Do not round intermediate calculations.)

	Actual Cost Standard Cost ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?

Required

Note: please solve the problem completely. Thank you.

Answer 1

Question – 1;

Direct materials price variance = $950 Unfavourable

Direct materials quantity variance = $16611 Unfavourable

Explanation;

Direct materials price variance = (SP – AP) * AQ

SP = $4.20

AP = $4.25

AQ = 19000

Thus, Direct materials price variance = ($4.20 – $4.25) * 19000

= $950 Unfavourable

Direct materials quantity variance = (SQ – AQ) * SP

SP = $4.20

SQ (30090 * 0.50) = 15045

AQ = 19000

Thus, Direct materials quantity variance = (15045 – 19000) * $4.20

= $16611 Unfavourable

Question – 2;

Direct labor rate variance = $6116 Favourable

Direct labor efficiency variance = $11118 Unfavourable

Explanation;

Direct labor rate variance = (SR – AR) * AH

SR = $20.40

AR ($107308 / 5560) = $19.30

AH = 5560

Thus, Direct labor rate variance = ($20.40 – $19.30) * 5560

= $6116 Favourable

Direct labor efficiency variance = (SH – AH) * SR

SR = $20.40

SH (30090 * 10 / 60) = 5015

AH = 5560

Thus, Direct labor efficiency variance = (5015 – 5560) * $20.40

= $11118 Unfavourable