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 1 year ago

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