Question

Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labour standards for one unit of Zoom follow: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 4.40 kilograms $ 2.20 per kilogram $ 9.68 Direct labour 0.41 hour $ 11.00 per hour 4.51 Variable overhead 0.41 hour $ 1.80 per hour 0.74 The budgeted fixed overhead cost is $15,851 per month. The denominator activity level of the allocation base is 861 direct labour-hours. During the most recent month, the following activity was recorded: a. 9,100 kilograms of material were purchased at a cost of $2.22 per kilogram. b. All of the material purchased was used to produce 2,100 units of Zoom. c. A total of 850 hours of direct labour time was recorded at a total labour cost of 9,435. d. The variable overhead cost was $1,700, and the fixed overhead cost was $17,108.

Required:

1. Compute the direct materials price and quantity variances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

2. Compute the direct labour rate and efficiency variances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

3. Compute the variable overhead spending and efficiency variances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round "Efficiency variance" to 2 decimal places.)

4. Compute the fixed overhead budget and the volume variances for the month. (Round intermediate calculations to the nearest whole dollar amount. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

5. Compute the underapplied or overapplied overhead for the month. (Round intermediate calculations and round final answer to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Answer 1

• All working forms part of the answer
• Workings

Actual DATA for		2100	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	9100	$                   2.22	$           20,202.00
Direct labor	850	$                11.10	$             9,435.00
Variable Overhead	850	$                   2.00	$             1,700.00

Standard DATA for		2100	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 4.4 kgs x 2100 units)=9240 kgs	$                   2.20	$       20,328.00
Direct labor	( 0.41 hours x 2100 units)=861 hours	$                11.00	$         9,471.00
Variable Overhead	( 0.41 hours x 2100 units)=861 hours	$                   1.80	$         1,549.80

• [1]

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                                2.20	-	$                       2.22	)	x	9100
	-182
	Variance		$                  182.00			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	9240	-	9100	)	x	$                           2.20
	308
	Variance		$                  308.00			Favourable-F

• [2]

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                              11.00	-	$                    11.10	)	x	850
	-85
	Variance		$                    85.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	861	-	850	)	x	$                        11.00
	121
	Variance		$                  121.00			Favourable-F

• [3]

Variable Overhead Rate/spending Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                                1.80	-	$                       2.00	)	x	850
	-170
	Variance		$                 170.00			Unfavourable-U
Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	861	-	850	)	x	$                           1.80
	19.8
	Variance		$                    19.80			Favourable-F

• [4]

Fixed Overhead Production Budget Variance
(	Budgeted Fixed Overhead	-	Actual Fixed Overhead incurred	)
(	$                      15,851.00	-	$            17,108.00	)
	-1257
	Variance		$              1,257.00			Unfavourable-U

Fixed Overhead Production Volume Variance
(	Standard Fixed Overhead or Fixed Overhead absorbed	-	Budgeted Fixed Overhead	)
(	$                      15,851.00	-	$            15,851.00	)
	0
	Variance		$                           -			None