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	5.40	pounds	$	3.00	per pound	$	16.20
Direct labor	0.40	hours	$	6.00	per hour	$	2.40

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

1. Ten thousand four hundred pounds of material were purchased at a cost of $2.90 per pound.

2. The company produced only 1,040 units, using 9,360 pounds of material. (The rest of the material purchased remained in raw materials inventory.)

3. 516 hours of direct labor time were recorded at a total labor cost of $6,192.

Required:

Compute the 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). Input all amounts as positive values. Do not round intermediate calculations.)

Answer 1

Solution

Material Price Variance	$           1,040.00	Favourable-F
Material quantity variance	$         11,232.00	Unfavourable-U

Alternate answer---------

Material Price Variance	$               936.00	Favourable-F
Material quantity variance	$         11,232.00	Unfavourable-U

Working

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    3.00	-	$                        2.90	)	x	10400
	1040
	Variance		$                1,040.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	5616	-	9360	)	x	$              3.00
	-11232
	Variance		$             11,232.00			Unfavourable-U

.

Standard DATA for		1040	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 5.4 pounds x 1040 Units)=5616 pounds	$                   3.00	$            16,848.00

.

Actual DATA for		1040	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	9360	$            2.90	$          27,144.00