Question

The following information describes production activities of Mercer Manufacturing for the year. Actual direct materials used Actual direct labor used Actual units produced 32,000 1bs. at $5.85 per lb. 10,610 hours for a total of $218,566 63,030 Budgeted standards for each unit produced are 0.50 pounds of direct material at $5.80 per pound and 10 minutes of direct labor at $21.60 per hour. 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 and efficiency variances. Indicate whether each variance is favorable or unfavorable

Answer 1

1)

Actual Cost								Standard Cost
AQ	X	AP		AQ	X	SP		SQ	X	SP
32,000.00	X	5.85		32,000.00	X	5.80		31,515.00	X	5.80
	187,200.00				185,600.00				182,787.00
			1,600.00				2,813.00

Direct Materials Price Variance				1,600.00	Unfavorable
Direct Materials quantity Variance				2,813.00	Unfavorable
Total Direct Materials Variance				4,413.00	Unfavorable

2)

Actual Cost								Standard Cost
AH	X	AR		AH	X	SR		SH	X	SR
10,610.00	X	20.60		10,610.00	X	21.60		10,505.00	X	21.60
	218,566.00				229,176.00				226,908.00
			10,610.00				2,268.00

Direct Labor Rate Variance				10,610.00	Favorable
Direct Labor Efficiency Variance				2,268.00	Unfavorable
Total Direct Labor Variance				8,342.00	Favorable