Reed Corp. has set the following standard direct materials and direct labor cost

Question

Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures. Direct materials (10 lbs. $3 per lb.) Direct labor (2 hrs. $12 per hr.) $36 24 During June the company incurred the following actual costs to produce 9,000 units Direct materials (92,00 lbs.$2.95 per lb.) Direct labor (18,800 hrs. $12.e5 per hr.) $271,400 226,540 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 variance and the direct labor efficiency variance. Indicate whether each variance is favorable or unfavorable.

Explanation / Answer

1.

Direct Materials price variance = 4,600 Favourable

Direct Materials quantity variance = 6,000 Unfavourable

Direct labour rate variance = 940 Unfavourable

Direct labour efficiency variance = 9,600 Unfavourable

AQ * AP AQ * SP SQ * SP 92,000 * 2.95 92,000 * 3 9,000*10 = 90,000 * 3 271,400 276,000 270,000 4,600 6,000

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