Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures. Direct materials (10 lbs. @ $3 per lb.) $30 Direct labor (2 hrs. @ $12 per hr.) 24 During June the company incurred the following actual costs to produce 9,000 units. Direct materials (92,000 lbs. @ $2.95 per lb.) $ 271,400 Direct labor (18,800 hrs. @ $12.05 per hr.) 226,540 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.)
Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures. Direct materials (10 lbs. @ $3 per lb.) $30 Direct labor (2 hrs. @ $12 per hr.) 24 During June the company incurred the following actual costs to produce 9,000 units. Direct materials (92,000 lbs. @ $2.95 per lb.) $ 271,400 Direct labor (18,800 hrs. @ $12.05 per hr.) 226,540 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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures.
| Direct materials (10 lbs. @ $3 per lb.) | $30 | |||
| Direct labor (2 hrs. @ $12 per hr.) | 24 | |||
During June the company incurred the following actual costs to produce 9,000 units.
| Direct materials (92,000 lbs. @ $2.95 per lb.) | $ | 271,400 | ||
| Direct labor (18,800 hrs. @ $12.05 per hr.) | 226,540 | |||
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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