Budgeted standards for each unit produced are 0.50 pounds of raw material at $4.

ID: 2494186 • Letter: B

Question

Budgeted standards for each unit produced are 0.50 pounds of raw material at $4.55 per pound and 10 minutes of direct labor at $20.90 per hour.

Compute the direct materials price and quantity variances. (Round your answers to 2 decimal places.)

Compute the direct labor rate and efficiency variances. (Do not round your intermediate calculations. Round your answers to 2 decimal places.)

The following information describes production activities of Mercer Manufacturing for the year:

Data Available:

Actual raw materials used = 25,000 lbs. at $4.60 per lb.

Actual units produced = 36,000

Standard Quantity for each Unit of output = 0.50 pounds of Raw Material

Standard Rate per Pound = $4.55

Actual factory payroll = 6,050 hours for a total of $120,395

Standard Time for each Unit of output = 10 Minutes

Direct labor = $20.90 per hour

Workings:

Standard Quantity of Raw Material = 36,000 X 0.50 = 18,000

Actual Direct Labor rate = $120,395 / 6,050 = $19.90

Standard Time for Total ouput = 36,000 X 10 Minutes / 60 = 6,000 Hours

Direct materials price variance

(Standard Price per unit - Actual Price per unit) X Actual Quantity of Direct Material

= ($4.55 - $4.60) X 25,000

= 1,250 Unfavourable

Direct materials quantity variance

(Standard Quantity - Actual Quantity) X Standard Price per unit of Direct Material

= (18,000 - 25,000) X $4.55

= 31,850 Unfavourable

Direct Labor rate variance

(Standard Direct Labor rate - Actual Direct Labor rate) X Actual Direct Labor hours

= ($20.90 - $19.90) X 6,050 hours

= 6,050 Favourable

Direct Efficiency variance

(Standard Direct Labor hours - Actual Direct Labor hours) X Standard Direct Labor rate per hour

= ( 6,000 – 6,050) X $20.90

= 1,045 Unfavourable

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