Lucia Company has set the following standard cost per unit for direct materials and direct labor. Direct materials (15 pounds @ $4 per pound) Direct labor (3 hours@ $15 per hour) During May the company incurred the following actual costs to produce 9,000 units. Direct materials (138,000 pounds @ $3.75 per pound) Direct labor (31,000 hours @ $15.10 per hour) AR = Actual Rate SR Standard Rate AQ Actual Quantity SQ Standard Quantity AP = Actual Price SP Standard Price $ 60 45 $ 517,500 468,100 (1) Compute the direct materials price and quantity variances. (2) Compute the direct labor rate variance and the direct labor efficiency variance.

Lucia Company has set the following standard cost per unit for direct materials and direct labor. Direct materials (15 pounds @ $4 per pound) Direct labor (3 hours@ $15 per hour) During May the company incurred the following actual costs to produce 9,000 units. Direct materials (138,000 pounds @ $3.75 per pound) Direct labor (31,000 hours @ $15.10 per hour) AR = Actual Rate SR Standard Rate AQ Actual Quantity SQ Standard Quantity AP = Actual Price SP Standard Price $ 60 45 $ 517,500 468,100 (1) Compute the direct materials price and quantity variances. (2) Compute the direct labor rate variance and the direct labor efficiency variance.

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Description: Lucia Company has set the following standard cost per unit for direct materials and direct labor.Direct materials (15 pounds @ $4 per pound)Direct labor (3 hours@ $15 per hour)During May the company incurred the following actual costs to produce 9,0

FINANCIAL ACCOUNTING

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Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Concept explainers

Variance Analysis

In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.

Standard Costing

The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.

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Question

Lucia Company has set the following standard cost per unit for direct materials and direct labor.
Direct materials (15 pounds @ $4 per pound)
Direct labor (3 hours@ $15 per hour)
During May the company incurred the following actual costs to produce 9,000 units.
Direct materials (138,000 pounds @ $3.75 per pound)
Direct labor (31,000 hours @ $15.10 per hour)
$ 517,500
468,100
AR Actual Rate
SR Standard Rate
AQ = Actual Quantity
SQ Standard Quantity
AP Actual Price
SP Standard Price
$ 60
45
(1) Compute the direct materials price and quantity variances.
(2) Compute the direct labor rate variance and the direct labor efficiency variance.

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Step 2: Calculation showing the materials price&quantity variance, standard quantity for actual production:

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Step 3: Table showing the direct materials price and quantity variances:

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Step 4: Calculation showing the labor rate & efficiency variance, standard hours for actual production:

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Step 5: Table showing direct labor rate and direct labor efficiency variance:

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