Problem #1 Chapter 8 Flexible Budget and Standard Costs

Hutto Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures. During May, the company incurred the following actual costs to produce 4,000 units.

• Compute the direct materials price and quantity variances. Indicate whether each variance is favorable or unfavorable.
• Compute the direct labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.

Standard Actual

Direct materials (8 lbs. @ $5.00 per lb.) (33,000 lbs. @ $4.80 per lb.)

Direct labor (2 hrs. @ $16.00 per hr.) (10,000 hrs. @ $16.50 per hr.)

Part 1 Direct materials price variance:

Actual cost of direct materials used.....................................................................
Actual quantity used x Standard price..................................................................
Direct materials price variance (Favorable or Unfavorable)................................

Direct materials quantity variance:

Actual quantity used x Standard price..................................................................
Standard quantity x Standard price......................................................................
Direct materials quantity variance(Favorable or Unfavorable)............................

Part 2 Direct labor rate variance:

Actual hours x Actual rate per hour......................................................................
Actual hours x Standard rate per hour.................................................................
Direct labor rate variance(Favorable or Unfavorable).........................................

Direct labor efficiency variance:

Actual hours x Standard rate per hour.................................................................
Standard hours x Standard rate per hour.............................................................
Direct labor efficiency variance(Favorable or Unfavorable)................................