Question

Ex 23-12 Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures.
					Element	Qty per	Qty Measure	Cost per Qty	Total Cost
Direct Materials	10	Pounds	$3.00	$30
Direct Labor	2	Hours	$12.00	$24
During June the company incurred the following actual costs to produce 9,000 units.
Element	Qty per	Qty Measure	Cost per Qty	Total Cost
Direct Materials	92,000	Pounds	$2.95	$271,400
Direct Labor	18,800	Hours	$12.05	$226,540
Compute the (1) direct materials price and quantity variances and (2) direct labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.
					Green highlights you must input
(1) direct materials price and quantity variances
Direct materials price variance
	Usage	Unit Cost	Total Cost
Direct materials price variance (fav)
Direct materials quanity variance
Direct materials quanity variance (fav)
Direct labor price variance
	Usage	Unit Cost	Total Cost
Direct labor price variance (fav)
Direct labor quanity variance
Direct labor quanity variance (fav)

Answer 1

Answer:-

Material price variance = (Standard price – Actual price) * Actual quantity used

                                       = ($3.00 per pound - $2.95 per pound)*92000 pound   

                                       = $4600 Favourable

Material Quantity variance = (Standard Quantity- Actual Quantity)*Standard price

                                              =(90000 pounds – 92000 pounds)* ($3.00 per pound

                                             = $6000 Unfavourable

Where:-

Standard Quantity = No. of pound per unit*Actual output

                               =10 pounds per unit *9000 units =90000 pounds

Direct Labor rate variance = (Standard rate – Actual rate) * Actual hours

                                       = ($12.00 per hour - $12.05 per hour)* 18800 hours   

                                       = $940 Unfavourable

Direct Labor Efficiency variance=(Standard hours-Actual hours)*Standard rate per hour

                                       =(18000 hours – 18800 hours)*$12.00 per hour

                                          = $9600 Unfavourable

Where:-

Standard Hours = No. of hours per unit*Actual output

                             = 2 hours per unit *9000 units =18000 hours