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 (3 hrs. @ $14 per hr.)			42

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

Direct materials (129,900 lbs. @ $3.80 per lb.)		$	493,620
Direct labor (28,300 hrs. @ $14.10 per hr.).			399,030

AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price

AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate

(1) Compute the direct materials price and quantity variances.
(2) Compute the direct labor rate variance and the direct labor efficiency variance. Indicate whether each variance is favorable or unfavorable.

1. Compute the direct materials price and quantity variances and classify it as favorable or unfavorable.

	Actual Cost 0 0 Standard Cost $0 0 $0 $0 0

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

	Actual Cost Standard Cost $0 0 $0 $0 0

PLEASE ALSO GIVE FORMULAS AND EXPLANATIONS!!

Answer 1

1)
Material Price Variance			=	(Standard Price-Actual Price)*Actual Quantity
			=	(4-3.80)*129900
			=	$         25,980	Favorable
Materials Quantity Variance			=	(Standard Quantity-Actual Quantity)*Standard Price
			=	(126000-129900)*4
			=	$         15,600	Unfavorable
Working:
Standard Quantity			=	Actual Production x Standard Quantity per unit produced
			=	8400	x	15
			=	1,26,000
2)
Direct Labor rate variance			=	(Standard rate-Actual rate)*Actual labor hours
			=	(14-14.10)*28300
			=	$           2,830	Unfavorable
Direct Labor efficiency Variance			=	(Standard Labor hours-Actual Labor hours)*Standrad Labor rate
			=	(25200-28300)*14
			=	$         43,400	Unfavorable
Working:
Standrad Labor hours			=	Actual Production x Standrad labor hours per unit produced
			=	8400	x	3
			=	25,200