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.

During June the company incurred the following actual costs to produce 9,000 units.

       

Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures.

(1) Compute the direct materials price and quantity variances. Actual Cost Standard Cost AQ AP Aa SP Sa SP 92,000 S 2.95 92,000 $ 3.00 S 3.00 276,000 $ 4,600 $ 4,600 (2) Compute the direct labor rate variance and the direct labor efficiency variance. Indicate whether each variance is favorable or unfavorable. Actual Cost Standard Cost S 6.05

Explanation / Answer

Actual Cost -4600 6000 Standard Cost AQ x AP AQ x SP SQ x SP 92,000 x 2.95 92,000 x 3 90,000 x 3 271400 276000 270000 4600 1400 6000 Direct materials price variance 4600 Favorable Direct materials quantity variance 6000 Unfavorable Total direct materials variance 1400 Unfavorable 2 Actual Cost 1880 9600 Standard Cost AH AR AH SR SH SR 37,600 6.05 37,600 6 36,000 6 227480 225600 216000 1880 11480 9600 Direct labor rate variance 1880 Unfavorable Direct labor efficiency variance 9600 Unfavorable Total direct labor variance 11480 Unfavorable

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