Exercise 21-15 Direct materials and direct labor variances LO P2 The following information describes production activities of Mercer Manufacturing for the year.

Actual direct materials used 16,000 lbs. at $4.05 per lb.

Actual direct labor used 5,545 hours for a total of $105,355

Actual units produced 30,000

Budgeted standards for each unit produced are 0.50 pounds of direct material at $4.00 per pound and 10 minutes of direct labor at $20 per hour.

Compute the direct materials price and quantity variances

Direct materials price variance = $800 Unfavorable

Direct materials quantity variance = $4,000 Unfavorable

Explanation:

Direct materials price variance = Aq*Ap-Aq*Sp

= (16,000*$4.05) - (16,000*$4.00)

= $800 Unfavorable

Direct materials quantity variance = Aq*Sp - Sq*Sp

= (16,000*$4.00) - (30,000*0.50 pounds*$4.00)

= $4,000 Unfavorable

Instructions are below.

Explanation:

Giving the following information:

Actual direct materials used 16,000 lbs. at $4.05 per lb.

Actual units produced 30,000

Budgeted standards for each unit produced are 0.50 pounds of direct material at $4.00 per pound.

To calculate the direct material price and quantity variance, we need to use the following formulas:

Direct material price variance = (standard price - actual price) * actual quantity

Direct material price variance = (4 - 4.05) * 16,000

Direct material price variance = $800 unfavorable

Direct material quantity variance = (standard quantity - actual quantity) * standard price

Standard quantity = 30,000*0.5 = 15,000

Direct material quantity variance = (15,000 - 16,000) * 4

Direct material quantity variance = $4,000 unfavorable