38. Materials and Labor Variances. Solar Products, Inc., produces solar power systems for commercial buildings. Each solar power system has three solar panels. (This is the same company as the previous exercise. This exercise can be assigned independently.) For direct materials, the standard price for a solar panel is $40. A standard quantity of 3 panels is expected to be used in each solar power system produced. During January, the company purchased 1,000 panels for $38,000 and used 980 panels to produce 320 solar power systems. For direct labor, the company established a standard number of direct labor hours at 35 hours per solar power system. The standard rate is $18 per hour. A total of 10,000 direct labor hours were worked during January, at a cost of $190,000, to produce 320 solar power systems. Required: a. Calculate the materials price variance and materials quantity variance using the format shown in Figure 10.2. Clearly label each variance as favorable or unfavorable. b. Calculate the labor rate variance and labor efficiency variance using the format shown in Figure 10.3. Clearly label each variance as favorable or unfavorable. 38. Materials and Labor Variances (continued) b. Incorrect Incorrect As shown below, the labor rate variance is: As shown below, the labor efficiency variance Incorrect Favorable Correct Actual Labor Costs = AH X AR Actual Hours at Standard Rate AH X SR Standard Labor Costs (Flexible Budget) =SH X SR hours x per hour hours x per hour hours per hour $180,000 labor rate variance labor efficiency variance Check your detail work here by reviewing the Correct/Incorrect column. Check your work AH is: Incorrect AR is: Incorrect AH X AR is: Incorrect SR is: Incorrect AH x SR is: Correct SH is: Incorrect SH x SR is Incorrect