Question

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

Actual direct materials used 18,000 lbs. at $4.15 per lb.
Actual direct labor used 5,555 hours for a total of $106,656
Actual units produced 30,060
Budgeted standards for each unit produced are 0.50 pound of direct material at $4.10 per pound and 10 minutes of direct labor at $20.20 per hour.
AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate
AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price
(1) Compute the direct materials price and quantity variances and classify each as favorable or unfavorable. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance. Round "Cost per unit" answers to 2 decimal places.)
(2) Compute the direct labor rate and efficiency variances and classify each as favorable or unfavorable. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)

Answer 1

See below

Step-by-step explanation:

1

Direct material price variance

= (Standard price - Actual price) × Actual quantity

= ($4.10 - $4.15) × 18,000

= -$0.05 × 18,000

= $900 Unfavorable

Direct material quantity variance

= (Standard quantity - Actual quantity) × Standard price

= (30,060 × 0.50 - 18,000) × $4.10

= (15,030 - 18,000) × $4.10

= -2,970 × $4.10

= 12,177 Unfavorable

2.

Direct labor rate variance

= (Standard rate - Actual rate) × Actual quantity

= ($20.2 - $106,656/5,555 hours) × 18,000

= ($20.2 - $19.2) × 5,555

= $1 × 5,555

= $5,555 Favourable

Direct labor efficiency variance

= (Standard quantity - Actual quantity) × Standard rate

= (10/60 × 30,060 - 5,555) × $20.2

= (5,010 - 5,555) × $20.2

= -545 × $20.2

= $11,009 Unfavourable