Question

8-15

The following information describes production activities of Mercer Manufacturing for the year. Actual direct materiaïs used Actual direct labor used 32,000 Ïbs. at ș5.85 per lb. 10,610 hours for a total of $218,566 63,030 Actual units produced 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 Ratee SR Standard Rate

Answer 1

1.)

Actual Cost								Standard Cost
Actual qty	Actual Price	Actual cost		Actual qty	Standard price	Standard Cost of Actual qty		Standard Quantity	Std price	Standard cost
32000lbs	$ 5.85	$187200		32000 lbs	$ 5.80	$ 185600		31515	$5.80	$182787
Material Price Variance			1600 U	Material Quantity Variance			2813 A
Material Price Variance				1600	U
Material Quantity Variance				2813	U
Total Material Cost Variance				4413	U

2)

Actual Cost								Standard Cost
Actual Hours	Actual Rate	Actual Cost		Actual Hours	Standard Rate	Standard Cost of Actual hours		Standard Hours	Standard Rate	Standard Cost
10610	$ 20.60	$218566		10610	$21.60	$229176		10505	$21.60	$226908
Labour Rate Variance			10610 F	Labour Efficiency Variance			2268U
Labour Rate Variance				$	10610 F
Labour Efficiency Variance				$	2268 U
Total Labour Cost Variance				$	8342 F

Working Notes:

Material Price Variance=(Standard Price-Actual Price)*Actual Quantity Purchased

Material Price Variance =(5.80-5.85)*32000=1600(U)

Material Quantity Variance=(Standard Quantity-Actual Quantity)*Standard Price

Material Quantity Variance=(31515-32000)*5.80=2813(U)

Direct Labour Rate Variance=(Standard Rate/hour-Actual Rate/hour)*Actual hours

                                           =(Standard rate*Actual hours-actual rate*Actual hours)

                                            = $21.60*10610 hours-$ 218566=$ 10610(F)

Direct Labour Efficiency Variance=(Standard hours-Actual hours)* Standard rate/hour

                                                              =(10505 hours-10610 hours)*$ 21.60= $ 2268(U)