
Concept explainers
Direct Material Price Variance:
The variance which is caused by the difference between the actual price per unit incurred and the expected price per unit to be incurred on the direct material is called the direct material price variance.
Direct Material Quantity Variance:
At the standard price, the difference between the actual quantity and standard quantity is termed as direct material quantity variance. The quantity variance measures the efficiency of management in utilizing the direct material for the production.
Direct Labor Rate Variance:
The difference between the actual rate per direct labor hour and standard rate per direct labor hours at the actual labor hour is called the direct labor rate variance. It measures the variance due the changes in the rate of direct labor hour.
Direct Labor Efficiency Variance:
The variance which is caused by the difference between the actual labor hours and standard labor hours allowed per unit is called the direct labor efficiency variance. It is computed by deducting the
To determine:
1. Computation of direct material price and quantity variances
2. Computation of direct labor rate and efficiency variances
Indicate the variances as favorable and unfavorable

Answer to Problem 11E
Solution:
1. Huto Corporation has favorable variance of $34,500 in direct material price and unfavorable variance of $12,000 in direct material quantity.
2. The company has unfavorable variance in both direct labor rate and efficiency with $3,100 and $60,000 respectively.
Explanation of Solution
Explanation:
1. Direct material price and quantity variance
2. Direct labor rate and efficiency variance
Conclusion:
The direct material price variance is favorable and the quantity variance is unfavorable.
The both direct labor rate and efficiency variance are unfavorable .
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Chapter 23 Solutions
Connect 2-Semester Access Card for Fundamental Accounting Principles
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