Hyde Company has set the following standards for one unit of product: Direct Mat

Question

Hyde Company has set the following standards for one unit of product: Direct Materials: Quantity: Rate: 4 pounds per unit $9 per pound Direct Labor: Quantity: Rate: 3 hours per unit $21 per hour Actual costs incurred in the production of 2,000 units were as follows: Direct Materials: $72,540 and 7,800 units Direct Labor: $115,206 and 5,460 hours Required: (please show your workings) Compute the following variances and indicate whether each variance is favorable or unfavorable. a. Direct Material Price Variance using AQ(AP SP) b. Direct Material Quantity Variance using SP(AQ-sQ) c. Direct Labor Rate Variance using AH(AR- SR) d. Direct Labor Efficiency Variance using SR(AH-SH)

Explanation / Answer

A)Direct material price variance = 7800[9.3 - 9]

                        = 2340U

              

**AP = 72540/7800=9.3

B)Direct material quantity variance = 9[7800-8000]

                                   = -1800 F   [Enter as 1800F]

**SQ = 2000*4=8000

C)Direct labor rate variance= 5460 [21.1-21]

                              = 546 U

**AR =115206/5460=21.1

D)Labor efficiency variance = 21[5460-6000]

                    - 11340 F   [enter as 11340F]

**SH = 2000*3=6000

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