Question

Hutto 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 (4 hrs. @ $14 per hr.) 56 During May the company incurred the following actual costs to produce 8,200 units. Direct materials (125,700 lbs. @ $3.80 per lb.) $ 477,660 Direct labor (36,900 hrs. @ $14.10 per hr.). 520,290 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.)

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

	Actual Cost Standard Cost AH x AR AH x SR SH x SR x 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 -25140 0 Standard Cost AQ x AP AQ x SP SQ x SP 125,700 x $3.80 125,700 x $4.00 x $4.00 $477,660 $502,800 $25,140 25140 $0 Direct materials price variance $25,140 Favorable Direct materials quantity variance 0 Unfavorable Total direct materials variance Favorable

Answer 1

Direct material Price variance = AQ [AR-SR]

                            = 125,700 [3.8-4]

                            = 125700 * -.20

                            = -25140 F (enter as 25140 F if needs to be entered as positive vaue]

Direct material quantity variance =SR[AQ-SQ allowed for actual production]

                     = 4[125700 - (8200units *15 SQ per unit )]

                     = 4[125700 -123000]

                    = 4* 2700

                    = 10800 U

Total direct material variance =Material price variance + Material quantity variance

                          = -25140 F+ 10800 U

                        = - 14340 F (enter as 14340 F if needs to be entered as positive vaue]

2)Direct labor rate variance = AH[AR-SR]

              = 36900 [14.1-14]

              = 36900*.1

              = 3690 U

Direct labor efficiency variance =SR[AH-SH allowed for actual production]

                  = 14 [36900 -(8200 units *4)]

                  = 14[36900 - 32800]

                 = 14 * 4100

               = 57400 U

Total direct labor variance= 3690U +57400 U

                = 61090 U