Exercise 21-11 Direct materials and direct labor variances LO P2 Hutto Corp. has
ID: 2523677 • Letter: E
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Exercise 21-11 Direct materials and direct labor variances LO P2 Hutto Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures Direct materials (15 1bs.$4 per 1b.) Direct labor (3 hrs. $15 per hr.) $60 45 During May the company incurred the following actual costs to produce 9,000 units Dírect materials (138,000 lbs. $3.75 per 1b. Direct labor 431,000 hrs. $15.10 per hr.) $517,500 468,100 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.Explanation / Answer
Answer:- 1)-Material price variance = (Standard price – Actual price) * Actual quantity purchased
= ($4.00 per lb. - $3.75 per lb.)*138000 lbs.
= $34500 Favourable
Material Quantity variance = (Standard Quantity- Actual Quantity)*Standard price
=(135000 lbs. – 138000 lbs.)*$4.00 per lbs.
= $12000 Unfavourable
Where:-
Standard Quantity = No. of lb. per unit*Actual output
=15 lbs. per unit *9000 units =135000 lbs.
2)- Direct Labor rate variance = (Standard rate – Actual rate) * Actual hours
= ($15.00 per hour - $15.10 per hour)* 31000 hours
= $3100 Unfavourable
Direct Labor Efficiency variance=(Standard hours-Actual hours)*Standard rate per hour
=(27000 hours – 31000 hours)*$15.00 per hour
= $60000 Unfavourable
Where:-
Standard Hours = No. of hours per unit*Actual output
= 3 hours per unit *9000 units =27000 hours
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