Question

The following information describes production activities of Mercer Manufacturing for the year.

Actual direct materials used 31,000 1bs. at $5.80 per lb
Actual direct labor used 10,600 hours for a total of $217,300
Actual units produced . 63,000
Budgeted standards for each unit produced are 0.50 pounds of direct material at $5.75 per pound and 10 minutes $21.50 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 variances
(2) Compute the direct labor rate and efficiency varian rect labor rate and efficiency variances.

Answer 1

Results are below.

Step-by-step explanation:

To calculate the direct material price and quantity variance, we need to use the following formulas:

Direct material price variance= (standard price - actual price)*actual quantity

Direct material price variance= (5.75 - 5.8)*31,000

Direct material price variance= $1,550 unfavorable

Direct material quantity variance= (standard quantity - actual quantity)*standard price

Direct material quantity variance= (63,000*0.5 - 31,000)*5.75

Direct material quantity variance= $2,875 favorable

To calculate the direct labor rate and efficiency variance, we need to use the following formulas:

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

Direct labor time (efficiency) variance= (10,500 - 10,600)*21.5

Direct labor time (efficiency) variance= $2,150 unfavorable

Standard quantity= (10/60)*63,000= 10,500 hours

Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity

Direct labor rate variance= (21.5 - 20.5)*10,600

Direct labor rate variance= $10,600 favorable

Actual rate= 217,300 / 10,600= $20.5