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Hutto Corp. has set the following standard direct materials and direct labor costs per unit for...

Hutto 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. @ $16 per hr.) 48


During May the company incurred the following actual costs to produce 8,800 units.

Direct materials (135,000 lbs. @ $2.80 per lb.) $ 378,000
Direct labor (29,700 hrs. @ $16.10 per hr.). 478,170


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.)

Solutions

Expert Solution

Answer 1

MATERIAL

Given that

Standard Price $      3.00
Standard quantity    132,000
Actual price $      2.80
Actual Quantity    135,000
Material Price Variance = (Standard Price-Actual price)*Actual Quantity
Material Price Variance = (3-2.8)*135000
Material Price Variance = $ 27000 (F)
Material Quantity Variance = (Standard quantity-Actual Quantity)*Standard Price
Material Quantity Variance = (132,000-135,000) * $ 3
Material Quantity Variance = $ 9,000 (U)

Answer 2

LABOR

Given that

Standard rate $    16.00
Standard hours (8800*3)      26,400
Actual rate $    16.10
Actual hours      29,700
Labor rate Variance = (Standard rate-Actual rate)*Actual hours
Labor rate Variance = ($ 16 - $ 16.1) * 29,700
Labor rate Variance = 2,970 (U)
Labor efficiency Variance = (Standard hours - Actual hours) * Standard rate
Labor efficiency Variance = (26,400 - 29,700) * $ 16
Labor efficiency Variance = $ 52,800 (U)

In case of any doubt, please comment.

ekkarill92 answered 2 years ago
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