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Evaluate direct labor rate variance and efficiency variance

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Reference no: EM132587042

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

Direct materials (14 lbs. @ $3 per lb.) $42

Direct labor (4 hrs. @ $15 per hr.) 60

During June the company incurred the following actual costs to produce 8,900 units.

Direct materials (127,000 lbs. @ $2.75 per lb.) $349,250

Direct labor (39,000 hrs. @ $15.15 per hr.). 590,850

AQ = Actual Quantity

SQ = Standard Quantity

AP = Actual Price

SP = Standard Price

AH = Actual Hours

SH = Standard Hours

AR = Actual Rate

SR = Standard Rate

Question (1) Compute the direct materials price and quantity variances.

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

Reference no: EM132587042

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