Answered: Reed Corp. has set the following…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter9: Evaluating Variances From Standard Costs

Section: Chapter Questions

Problem 10E: Ada Clothes Company produced 40,000 units during April. The Cutting Department used 12,800 direct...

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Question

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


Direct materials (10 lbs. @ $3 per lb.)			$30
Direct labor (2 hrs. @ $12 per hr.)			24

During June the company incurred the following actual costs to produce 9,000 units.


Direct materials (92,000 lbs. @ $2.95 per lb.)	$	271,400
Direct labor (18,800 hrs. @ $12.05 per hr.)		226,540

AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate

AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price

(1) Compute the direct materials price and quantity variances. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)
(2) Compute the direct labor rate variance and the direct labor efficiency variance. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)

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