Hutto Corp. has set the following standard direct materials and direct labor cos

Question

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

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

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.

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

PLEASE ALSO GIVE FORMULAS AND EXPLANATIONS!!

Explanation / Answer

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

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