Question

Hutto Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures.
Direct materials (15 lbs. @ $3 per lb.) $45
Direct labor (2 hrs. @ $15 per hr.) 30
During May the company incurred the following actual costs to produce 9,000 units.
Direct materials (137,100 lbs. @ $2.80 per lb.) $ 383,880
Direct labor (21,600 hrs. @ $15.10 per hr.). 326,160
Required :
(1) Compute the direct materials price and quantity variances. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)

Answer 1

Answer:

-$27,420 Favorable; $6,300 Unfavorable

Explanation:

Direct material price variance:

= (Actual Quantity × Actual Rate) - (Actual Quantity × Standard Rate)

= (137,100 × $2.80) - (137,100 × $3)

= $383,880 - $411,300

= -$27,420 Favorable

Direct material quantity variance:

= (Actual Quantity × Standard Rate) - (Standard Quantity × Standard Rate)

= (137,100 × $3) - [(9,000 × $15) × $3]

= $411,300 - $405,000

= $6,300 Unfavorable