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		Standard Price or Rate			Standard Cost
Direct materials	7.80	pounds	$	2.30	per pound	$	17.94
Direct labor	0.30	hours	$	8.00	per hour	$	2.40

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

1. 25,900.00 pounds of material were purchased at a cost of $2.10 per pound.

2. All of the material purchased was used to produce 3,000 units of Zoom.

3. 700 hours of direct labor time were recorded at a total labor cost of $6,300.

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. Round your intermediate calculations to the nearest whole dollar.)

Answer 1

Answer-(1)

Lets Calculate Direct material Price variance for the month

Actual Price ==> 2.10

Standard Price ==> 2.30

Purchased Quantity ==> 25900

Direct material Price variance for the month

=>($2.10 per pound - $2.30 per pound) x 25,900 pound

=>$5,180 Favourable

Standard usage for actual production=>3000 unit x 7.80 pounds per unit

=>23400 pound

Direct material quantity variance for the month

actual quantity used =>$25,900

standard quantity=>$23400

Standard price=>$2.30

Direct material quantity variance

=>(25,900 - 23400) pounds x $2.30 per pound

=>$5750 Unfavourable

Answer-(2)

Lets Calculate Labour Rate variance for the month

Actual rate => $6,300/700 hours

Standard rate => $8/hour

actual hours => 700 hours

Labour Rate variance

==>$6,300/700 hours - $8/hour) x 700 hours

=>(9-8)*700=>$700

=>$700 Unfavourable

Standard hours allowed - actual production

=> 3,000 units x 0.30 hrs per unit

=>900 hours

Labour Efficiency variance for the month

actual hours used=>700 hours

standard hours allowed=>900 hours

Standard rate=> $8/hour

Labour Efficiency variance

=>(700 hours - 900 hours) x $8/hour

=>$1600 Favourable