Question - Hernandez Corporation uses a standard cost system and has established the following standards for one unit of product:
Standard Quantity Standard Price Standard Cost
Direct materials 10 pounds $2.60 per pound $26.00
Direct labor .25 hour $10.00 per hour 2.50 $28.50
During October, the company purchased 240,000 pounds of material at a total cost of $588,000. The total factory wages for October were $49,400. During October, 21,000 units of product were manufactured using 211,000 pounds of material and 5,200 direct labor hours.
Material quantity and price variances are recorded when materials are used.
a. Compute the material quantity and labor efficiency variances.
b. Compute the material price and labor rate variances.