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. @ $3 per lb.)			$45
Direct labor (2 hrs. @ $15 per hr.)			30

During May the company incurred the following actual costs to produce 8,400 units.

Direct materials (129,400 lbs. @ $2.80 per lb.)		$	362,320
Direct labor (20,500 hrs. @ $15.10 per hr.).			309,550

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.)

	Actual Cost 0 0 Standard Cost AQ x AP AQ x SP SQ x SP x 0 x x $0 0 $0 Direct labor rate variance $0 Total variable overhead cost variance 0 Total direct materials variance

Actual Cost Standard Cost AH x AR AH x SR SH x SR x x x $0 0 $0 Direct labor rate variance $0 Direct labor efficiency variance 0 Total direct labor variance

Answer 1

1) Direct Material Price Variance  =$25880 Favourable

Direct Material Price Variance = $10200 Unfavourable

Total Direct Material Variance = $15680 favourable

2) Direct Labour Rate Variance = $2050 Unfavourable

Direct Labour Efficiency Variance = $55500 Unfavourable

Total Direct Labour Variance =$57550 Unfavourable

Working

	Standard for Acutal Output (SQ)/SL	SP/SR	SQ *SP
Material	8400*15lbs=126000 lbs	$3per lbs	$378000
Labour	8400*2hrs 16800hrs	$15 per hr	$252000
	Acutal Quantity (AQ)	AP/SR	AQ*AP
Material	129400 lbs	$2.80per lbs	$362320
Labour	20500Hrs	$15.10per hr	$309550

Direct Materai Price Variance is the Difference of Standard cost for acutal quantity with respect to actual price and the Acutal Cost of output

Direct Material Price Variance = (SP -AP)*AQ

=SP*AQ - AP*AQ

=3*129400-$362320

=388200-362320

=$25880(F)

Direct Material Quantity Variance = (SQ-AQ)*SP

SQ*SP - AQ* SP

=$378000-129400*3

=378000-388200

=$10200(U)

Total Material Variance = Total Standard Cost - Total Actual cost or

= Direct Material Price + Direct Material Price Variance

=25880-10200

=15680(F)

2)Direct Labour Rate Variance = (SR - AR ) AH

SR*AH - AR* AH

=15*20500 - $309550

=$307500-$309550

=$2050(U)

Direct Labour Efficiency Variance = (SH -AH)*SR

=SH*SR - AH *SR

=$252000 - 20500*15

=$252000-$307500

=55500(u)

Total Laobur Variance = Labour Rate variance + Labour Efficiency Variance

=-$2050-55500

=57550(U)