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	7.90	pounds	$	2.10	per pound	$	16.59
Direct labor	0.50	hours	$	5.00	per hour	$	2.50

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

14,850.00 pounds of material were purchased at a cost of $2.00 per pound.

All of the material purchased was used to produce 1,500 units of Zoom.

600 hours of direct labor time were recorded at a total labor cost of $4,200.

Required:

1. Compute the materials price and quantity variances for the month.

2. Compute the labor rate and efficiency variances for the month.

Answer 1

AQ	=	Actual quantity
SQ	=	Standard quantity
AR	=	Actual rate
SR	=	Standard rate
Actual cost
AQ	x	AR		AQ	x	SR		SQ	x	SR
14,850	x	2.00		14,850	x	2.1		11,850	x	2.1
(1)	=	29,700		(2)	=	31,185		(3)	=	24,885
Direct material price variance				(2)	-	(1)	=	1,485		Favourable
Direct material quantity variance				(3)	-	(2)	=	-6,300		Unfavourable
Total direct material variance				(3)	-	(1)	=	-4,815		Unfavourable

2

AH	=	Actual hours
SH	=	Standard hours
AR	=	Actual rate
SR	=	Standard rate
Actual cost
AH	x	AR		AH	x	SR		SH	x	SR
600	x	7		600	x	5		750	x	5
(1)	=	4,200		(2)	=	3,000		(3)	=	3,750
Direct labor price variance				(2)	-	(1)	=	-1,200		Unfavourable
Direct labor efficiency variance				(3)	-	(2)	=	750		Favourable
Total direct labor variance				(3)	-	(1)	=	-450		Unfavourable