The following information describes the production activities of Mercer Manufacturing for the yearActual direct materials used 30,000 lbs. at $5.15 per 1bActual direct labor used 9,150 hours for a total of $186, 660Actual units produced 54,120Budgeted standards for each unit produced are 0.50 pounds of direct material at $5.10 per pound and 10 minutes at $21.40 per hourAQ = Actual QuantitySQ = Standard QuantityAP = Actual PriceSP = Standard PriceAH = Actual HoursSH = Standard HoursAR = Actual RateSR = Standard Rate (1) Compute the direct materials price and quantity variances. (2) Compute the direct labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.

Standard quantity = Actual units produced * 0.50 pound per unit

= 54,120 * 0.50

= 27,060 pounds

Standard hours = Actual units produced * 1/6 hour per unit

= 54,120 * 1/6

= 9,020 hours

Actual rate per hour = $186, 660 : 9,150 hours

= $20.4

(a) (i) Direct material price variance:

= (AQ * AP) - (AQ * SP)

= (30,000 * $5.15) - (30,000 * $5.10)

= $154,500 - $153,000

= $1,500 Unfavorable

(ii) Direct material quantity variance:

= (AQ * SP) - (SQ * SP)

= (30,000 * $5.10) - (27,060 * $5.10)

= $153,000 - $138,006

= $14,994 Unfavorable

(b) (i) Direct labor rate variances:

= (AH * AR) - (AH * SR)

= (9,150 * $20.4) - (9,150 * $21.40)

= $186,660 - $195,810

= $9,150 Favorable

(ii) Direct labor efficiency variances:

= (AH * SR) - (SH * SR)

= (9,150 * $21.40) - (9,020 * $21.40)

= $195,810 - $193,028

= $2,782 Unfavorable