Reed Corp. has set the following standard direct materials anddirect labor costs per unit for the product itmanufactures.
| | | | |
| Direct materials (15 lbs. @ $4 per lb.) | | | $60 | |
| Directlabor (3 hrs. @ $15 per hr.) | | | 45 | |
|
During June the company incurred the following actual costs toproduce 8,500 units.
| | | | |
| Direct materials (130,400 lbs. @ $3.70 per lb.) | | $ | 482,480 | |
| Directlabor (29,700 hrs. @ $15.15 per hr.). | | | 449,955 | |
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AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price
AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate
(1) Compute the direct materials price andquantity variances.
(2) Compute the direct labor rate variance and thedirect labor efficiency variance. Indicate whether each variance isfavorable or unfavorable.
