Saved Exercise 8-15 Direct materials and direct lab or variances LO P2 The follo

Question

Saved Exercise 8-15 Direct materials and direct lab or variances LO P2 The following informaton descnibes production acivitles of Mercer Manufacturing for the year. Actual direct materials used 30,000 1bs. at $5.15 per lb. Actual direct labor used Actual units produced 9,150 hours for a total of $186,668 54,120 Budgeted standards for each unit produced are 0.50 pounds of direct material at $5.10 per pound and 10 minutes $21.40 per hour. 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 vartances. Compute the direct labor rate and emciency varlances. indicate whether each vartance is favorable or unfevorable Complete this question by entering your answers in the tabs below. Compute the direct materials price and quantity variances. (Do not round intermediate calculations.) 10,1 All Next Prev

Explanation / Answer

Answer:-1)-

Material price variance = (Standard price – Actual price) * Actual quantity used

                                       = ($5.10 per pound - $5.15 per pound)*30000 pounds used   

                                       = $1500 Unfavourable

Material Quantity variance = (Standard Quantity- Actual Quantity)*Standard price

                                              =(27060 pounds – 30000 pounds)*$5.10 per pound

                                             = $14994 Unfavourable

Where:-

Standard quantity = Pounds of material per unit*Actual Production

                              =.50 pounds of material per unit*54120 unit = 27060 pounds

Explanation:- Material cost variance = Standard cost – Actual cost

                      =$138006 – $154500 = $16494 Unfavourable

Material cost variance = Price variance + Usage Variance

$16494 Unfaourable =$1500 Unfavourable+$14994 Unfavourable

Where:-

Standard cost = Price per pound* Pounds of material per unit *Actual Production

                     =$5.10*.50 Pounds of material per unit *54120 units

                   = $138006

Actual cost = 30000 pounds*$5.15 per pound =$154500

2)-

Direct Labor rate variance = (Standard rate – Actual rate) * Actual hours

                                       = ($21.40 per hour - $20.40)* 9150 hours   

                                       = $9150 Favourable

Direct Labor Efficiency variance=(Standard hours-Actual hours)*Standard rate per hour

                                       =(9020 hours – 9150 hours)*$21.40 per hour

                                          = $2782 Unfavourable

Where:-

Standard hours = Standard hours per unit*Actual units

                            =(10 minutes per unit*54120 units)/60 minutes

                              = 9020 hours

Actual rate per hour =Actual cost/total hours worked

                                 =$186660/9150 hours = $20.40 per hour

Explanation:-

Direct labor cost variance = Standard cost – Actual cost

                                           = $193028 - $186660 = $6368 Favourable

Direct Labor cost variance = Rate variance + Efficiency variance

$6368 Favourable=9150 Favourable + $2782 Unfavourable

Where:-

Standard cost = Standard rate hour*standard hour per unit*Actual units

                     =$21.40 per hour *(10 minutes per unit*54120 units/60 minutes)

                     = $193028

Actual cost = $186660

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