The following information describes production activities of Mercer Manufacturin

Question

The following information describes production activities of Mercer Manufacturing for the year. Actual direct materials used Actual direct labor used Actual units produced 26,000 lbs. at $4.70 per 1b. 9,250 hours for a total of $185,000 54,900 AH- Actual Hours SH Standard Hours AR Actual Rate SR Standard Rate AQ-Actual Quantity SQ Standard Quantity AP- Actual Price SP Standard Price Budgeted standards for each unit produced are 0.50 pounds of direct material at $4.65 per pound and 10 minutes of direct labor at $21.00 per hour. (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.

Explanation / Answer

1) Actual cost Standard cost AQ * AP AQ * SP SQ * SP 26,000 * 4.7 26,000 * 4.65 27000 * 4.65 122200 120900 125550 Direct materials price variance 1300 U Direct materials quantity variance 4650 F Total Direct materials variance 3350 F 2) Actual cost Standard cost AH * AR AH * SR SH * SR 9,250 * 20 9,250 * 21 9000 * 21 185000 194250 189000 Direct materials price variance 9250 F Direct materials quantity variance 5250 U Total Direct materials variance 4000 F

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