Question

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

Actual direct materials used 28,000 lbs. at $4.90 per lb.
Actual direct labor used 8,650 hours for a total of $174,730
Actual units produced 51,600
The budgeted standards for each unit produced are 0.50 pounds of direct material at $6.85 per pound and 10 minutes of direct labor at $21.20 per hour.
1. Compute the direct materials price and quantity variances. Do not round intermediate calculations.
2. Compute the direct labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable. Do not round intermediate calculations.

Answer 1

Actual Quantity = 28,000

Actual Price = 4.90

Standard Quantity = 25,800

Standard Price = 4.85

1)a. Direct Material Price variance = (Standard price – Actual Price)*Actual Quantity

= (4.85 - 4.90) * 28,000

= $1,400 U

b. Direct Material Quantity variance = (Standard Quantity – Actual Quantity)*Standard price

= (51,600*0.5 - 28,000)*4.85

= $10,670 U

2) a. Direct Labor Rate Variance = (Standard Rate – Actual Rate)*Actual Hours

= (21.20 - 20.2) * 8,650

= $8,650 F

b. Direct Labor Efficiency variance = (Standard Hours – Actual Hours)*Standard rate

= (51,600*1/6 - 8,650) * 21.20

= $1,060 U