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 

 

Standard Quantity or Hours		Standard Price or Rate			Standard Cost
Direct materials	4.6	pounds	$	2.50	per pound	$	11.50
Direct labor	0.2	hours	$	18.00	per hour	$	3.60

During the most recent month, the following activity was recorded:

1. Twenty thousand pounds of material were purchased at a cost of $2.35 per pound.

2. All of the material purchased was used to produce 4,000 units of Zoom.

3. 750 hours of direct labor time were recorded at a total labor cost of $14,925.

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 (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)

Answer 1

SP = standard price

AP = actual price

AQ = actual quantity

SQ = standard quantity at actual output

 

Materials Price Variance = (SP-AP) *AQ

= (2.50-2.35)*20,000

= 3000 F

.

Materials Quantity Variance = (SQ-AQ) *SP

= (4000*4.6 - 20,000)*2.50

= 4000 U

.

SR = standard rate

AR = actual rate

AH = actual hours

SH = standard hours at actual output

 

Labor Rate Variance = (SR-AR) *AH

= (18-14925/750)*750

= 1425 U

.

Labor efficiency variance = (SH-AH) *SR

= (4000*0.2 - 750)*18

= 900 F

Materials Price Variance = (SP-AP) *AQ

= (2.50-2.35)*20,000

= 3000 F