Question

Hutto Corp, has set the following standard direct materials and direct labor costs per unit for the product it manufactures. Direct materials (15 lbs. $4 per lb.) Direct labor (3 hrs. $15 per hr.) $60 During May the company incurred the following actual costs to produce 8,200 units. Direct materials (126,000 lbs. $3.50 per lb.) Direct labor (28,000 hrs. $15.10 per hr.). $478, 800 422,800 AH = Actual Hours SH - Standard Hours AR - Actual Rate SR Standard Rate AQ = Actual Quantity SQ - Standard Quantity AP - Actual Price SP - Standard Price (1) Compute the direct materials price and quantity variances. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.) (2) Compute the direct labor rate variance and the direct labor efficiency variance. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance. Round "Rate per hour answers to 2 decimal places.) Complete this question by entering your answers in the tabs below.

Answer 1

Actual Cost AQ SP AP X AQ Standard Cost SQ Х SP 123,000 $4 х lbs $3.90 х $4 126,000 lbs 126,000 lbs $478.800 $25,200 $504 poo |$12,000 $492,000 Direct Material Price Væiance $25,200 Favowable Direct Material Quantity Vasuance $12,000 Unfavourable Total Direct Material vacances $13,200 Favowlable Direct Material Price Variance (SP-AP)xAQ ($4-$3-80) x 126,000lbs $0.20x 126,000 $75,200 Favowlable) Direct Matecial Quantity Vacance (45Q - AQ)XSP (123,000 - 126,000 x $4 los 46s 3000lbs x $4 = $12,000 (unfavourable)

* Standard Quantity fou Actual Output = 15165 X 8200 units 123,000lbs

Note:

• The material price variance is favourable because the actual price is less than the estimated/standard price.

• The material quantity variance is an unfavourable variance because the actual quantity used is more than the standard quantity for produce 8200 units

• Total direct material variance

= Standard cost - Actual cost

= $492,000 - $478,800

= $13,200(Favourable)

12 Actual lost Slandard Cost SH X SR AH X AR AH X SR 28,000 hrs x $15.10 28,000 had $15 24,600 hos х $15 $422,800 2800 $420,000 $51,000 $369,000 Direct Labow rate Vacance $2800 unfavowlable Direct Labows Effecienty vouance $51,000 unfavoweable Total Direct Labou variance $53,800 unfavowiable - Direct Labou Hate Variance (SR - AR)x AH ($15 - $15410) X 28,000 hours $0.10 828,000 hrs $2800 (onfavourable) Direct Labou' Effeciency vasulance = (SH- AN)X SR (24,600 – 78,000) * $15 $51,00olUnfavourable) -

* Standard Howu fou Actual output 3hrs X 8200 units 24,600hrs =

Note:

• The direct labor rate variance is an unfavourable variance because the actual rate is more than the budgeted/standard rate.

• The direct labor effeciency variance is an unfavourable variance because the actual hrs worked is more the standard hours .

• Total direct labor variance

= Standard cost - Actual cost

= $369,000 - $422,800

= $53,800 (unfavourable)