Question

Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below: Standard Quantity or Hours 7.40 pounds 0.45 hours Standard Price or Rate $2.60 per pound $8.00 per hour Standard Cost $19.24 $ 3.60 Direct materials Direct labor During the most recent month, the following activity was recorded: a. 12,100.00 pounds of material were purchased at a cost of $2.50 per pound. b. All of the material purchased was used to produce 1,500 units of Zoom. C. 575 hours of direct labor time were recorded at a total labor cost of $5,750. Required: 1. Compute the materials price and quantity variances for the month. 2. Compute the labor rate and efficiency variances for the month. (For all requirements, Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (.e., zero variance). Input all amounts as positive values. Round your intermediate calculations to the nearest whole dollar.)

Answer 1

Answer

• Workings

Actual DATA for		1500	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	12100	$                   2.50	$           30,250.00
Direct labor	575	$                10.00	$             5,750.00

Standard DATA for		1500	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 7.4 pounds x 1500 units)=11100 pounds	$                   2.60	$       28,860.00
Direct labor	( 0.45 hours x 1500 units)=675 hours	$                   8.00	$         5,400.00

• Requirements

Material Price Variance	$                                                     1,210.00	Favourable-F
Material Quantity Variance	$                                                     2,600.00	Unfavourable-U
Labor Rate Variance	$                                                     1,150.00	Unfavourable-U
Labour Efficiency Variance	$                                                        800.00	Favourable-F

• Calculations

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                                2.60	-	$                       2.50	)	x	12100
	1210
	Variance		$              1,210.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	11100	-	12100	)	x	$                           2.60
	-2600
	Variance		$              2,600.00			Unfavourable-U

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                                8.00	-	$                    10.00	)	x	575
	-1150
	Variance		$              1,150.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	675	-	575	)	x	$                           8.00
	800
	Variance		$                  800.00			Favourable-F