may someone helpe resolve this problem. thank you Exercise 8-15 Direct materials
ID: 2470008 • Letter: M
Question
may someone helpe resolve this problem. thank you
Exercise 8-15 Direct materials and direct labor variances LO P2
The following information describes production activities of Mercer Manufacturing for the year:
Actual direct materials used 36,000 lbs. at $6.05 per lb. Actual direct labor used 11,100 hours for a total of $233,100 Actual units produced 66,030
Budgeted standards for each unit produced are 0.50 pounds of direct material at $6.00 per pound and 10 minutes of direct labor at $22.00 per hour.
(1) Compute the direct materials price and quantity variances. (Do not round intermediate calculations.)
(2) Compute the direct labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable. (Do not round intermediate calculations.)
Explanation / Answer
Direct Material Price Variance = Actual Quantity x Actual Price - Actual Quantity x Standard Price
=Actual Quantity(Actual Price-Standard Price)
=36000*(6.05-6) = 36000*0.05 = 1800(Unfavourable)
Direct Material Quantity Variance= ( SQ AQ ) × SP
Where,
SQ is the standard quantity allowed
AQ is the actual quantity of direct material used
SP is the standard price per unit of direct material
So, Direct Material Quantity Variance= [(66000*0.5)-36000] * 6 = 18000 (Unfavourable)
Direct Labor rate Variance= (Actual rate - Standard rate) x Actual hours worked
Actual Rate= Actual Labour Amount/ Number of Hours worked
= 233100/11100 = $21 per hour
Standard rate = $22 per hour
Hence Labour rate Variance = (21-22) * 11100 =11,100 Favourable
Labor efficiency variance=(Actual hours - Standard hours) x Standard rate
Actual Hours = 11100
Standard Hours= 66030 * (10/60) = 22010
Standard Rate = $22 pper hour
Hence, Labor efficiency variance= (11100-22010) * 22 = 240020 (Favourable)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.