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.)

Question

Briana Banks

Business

15 December, 12:46

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.)

+1

Answers (1)

Know the Answer?

Azaria Ritter · Answer 1

-$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