Exercise 21-12 Direct materials and direct labor variances LO P2 Reed Corp. has

Question

Exercise 21-12 Direct materials and direct labor variances LO P2 Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it Direct materials (15 Ibs.$4 per lb.) Direct labor (3 hrs.$15 per hr.) $60 45 During June the company incurred the following actual costs to produce 8,500 units. Direct materials (130,300 lbs. $3.80 per lb.) Direct labor (30,100 hrs. $15.10 per hr). $495,140 454,510 (1) Compute the direct material's price and quantity variances. Actual Cost (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

Explanation / Answer

Material price variance = (Stadard price - actual price)*Actual material use

= (4 - 3.80)*130300

= 26060 F

Material qty. variance = (Standard qty. for actual output - actual qty.)*standard price

standard qty for actual output = 15*8500 = 127500

so (127500 - 130300)*4

= 2800*4

= 11200 U

Calculation of labor variance -

Labor rate variance = difference between actual payment to workers for actual hours worked and if workers has been paid at standard rate

= 454510 - 451500

= 3010 U

Labor effciency variance = Difference between actual hours paid at standard rate and standard hours allowed for output achieved

standard hours allowed for 8500 units = 8500*3 = 25500 hours

so (30100 - 25500)*15

= 69000 U

In case of further clarification required please comment.

Standard Actual qty rate value used material rate value DM 15 4 60 130300 3.8 495140

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.