Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures.             Direct materials (14 lbs. @ $4 per lb.)     $56   Direct labor (2 hrs. @ $14 per hr.)     28     During June the company incurred the following actual costs to produce 8,900 units.             Direct materials (126,900 lbs. @ $3.75 per lb.)   $ 475,875   Direct labor (22,400 hrs. @ $14.15 per hr.).     316,960     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. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.) (2) Compute the direct labor rate variance and the direct labor efficiency variance. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures.
 

         
Direct materials (14 lbs. @ $4 per lb.)     $56  
Direct labor (2 hrs. @ $14 per hr.)     28  
 


During June the company incurred the following actual costs to produce 8,900 units.
 

         
Direct materials (126,900 lbs. @ $3.75 per lb.)   $ 475,875  
Direct labor (22,400 hrs. @ $14.15 per hr.).     316,960  
 


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. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)
(2) Compute the direct labor rate variance and the direct labor efficiency variance. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)
 

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