A partial standard cost card for the single product produced by Mercer Company is given below:
Direct materials: 3 pounds @ $8 per pound
Direct labor: ? hours @ ? per hour
Last period the company produced 4,000 units of product. Cost and other data associated with this production are given below:
The direct materials purchases variance is computed when the materials are purchased.
Required:
a. Determine the number of pounds of direct materials purchased and used during the period.
b. Determine the materials quantity variance.
c. Determine the standard direct labor rate per direct labor hour.
d. Determine the standard hours allowed for the production of the period.

a. Materials price variance = (Actual quantity × Actual price) − (Actual quantity × Standard price)
$2,520 Favorable = $103,320 − (Actual quantity × $8 per pound)
$2,520 = $103,320 − (Actual quantity × $8 per pound)
Actual quantity × $8 per pound = $103,320 − $2,520
Actual quantity × $8 per pound = $100,800
Actual quantity = $100,800 ÷ $8 per pound = 12,600 pounds
b. Materials quantity variance = (Actual quantity − Standard quantity) × Standard price
= (12,600 pounds − 12,000 pounds*) × $8 per pound
= (600 pounds) × $8 per pound
= $4,800 Unfavorable
*4,000 units × 3 pounds per unit = 12,000 pounds
c. If the total labor variance is $640 Unfavorable, and if the labor efficiency variance is $4,800 Unfavorable, then the labor rate variance must be $4,160 Favorable. Therefore:Labor rate variance = Actual hours × (Actual rate − Standard rate)
$4,160 Favorable = 10,400 hours × ($11.60 per hour* − Standard rate)
−$4,160 = 10,400 hours × ($11.60 per hour* − Standard rate)
−$4,160 = $120,640 − 10,400 hours × Standard rate
10,400 hours × Standard rate = $120,640 + $4,160
10,400 hours × Standard rate = $124,800
Standard rate = $124,800 ÷ 10,400 hours
Standard rate = $12 per hour
d. Labor efficiency variance = (Actual hours − Standard hours) × Standard rate
$4,800 Unfavorable = (10,400 hours − Standard hours) × $12 per hour
$4,800 = (10,400 hours − Standard hours) × $12 per hour
$4,800 = $124,800 − Standard hours × $12 per hour
Standard hours × $12 per hour = $124,800 − $4,800
Standard hours × $12 per hour = $120,000
Standard hours = $120,000 ÷ $12 per hour
Standard hours = 10,000 hours