Exercise 8-12 Direct materials and direct labor variances LO P2

Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures.

Direct materials (15 lbs. @ $4 per lb.)			$60
Direct labor (2 hrs. @ $16 per hr.)			32

During June the company incurred the following actual costs to produce 8,100 units.

Direct materials (123,900 lbs. @ $3.75 per lb.)		$	464,625
Direct labor (20,700 hrs. @ $16.15 per hr.).			334,305

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 and quantity variances. (2) Compute the direct labor rate variance and the direct labor efficiency variance. Indicate whether each variance is favorable or unfavorable.

Compute the direct materials price and quantity variances and classify it as favorable or unfavorable.

Actual Cost								Standard Cost

Actual Cost								Standard Cost