Exercise 21-15 Direct materials and direct labor variances LO P2 The following information describes production activities of Mercer Manufacturing for the year.

Actual direct materials used 16,000 lbs. at $4.05 per lb.
Actual direct labor used 5,545 hours for a total of $105,355
Actual units produced 30,000
Budgeted standards for each unit produced are 0.50 pounds of direct material at $4.00 per pound and 10 minutes of direct labor at $20 per hour.

Compute the direct materials price and quantity variances

Instructions are below.

Explanation:

Giving the following information:

Actual direct materials used 16,000 lbs. at $4.05 per lb.

Actual units produced 30,000

Budgeted standards for each unit produced are 0.50 pounds of direct material at $4.00 per pound.

To calculate the direct material price and quantity variance, we need to use the following formulas:

Direct material price variance= (standard price - actual price)*actual quantity

Direct material price variance= (4 - 4.05)*16,000

Direct material price variance= $800 unfavorable

Direct material quantity variance= (standard quantity - actual quantity)*standard price

Standard quantity= 30,000*0.5= 15,000

Direct material quantity variance= (15,000 - 16,000)*4

Direct material quantity variance= $4,000 unfavorable

Direct materials price variance = $800 Unfavorable

Direct materials quantity variance = $4,000 Unfavorable

Explanation:

Direct materials price variance = Aq×Ap-Aq×Sp

                                                   = (16,000×$4.05) - (16,000×$4.00)

                                                   = $800 Unfavorable

Direct materials quantity variance = Aq×Sp - Sq×Sp

                                               = (16,000×$4.00) - (30,000×0.50 pounds×$4.00 )

                                               = $4,000 Unfavorable

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