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	5.3	pounds	$	2.50	per pound	$	13.25
Direct labor	0.5	hours	$	5.50	per hour	$	2.75

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

a.	Ten thousand two hundred pounds of material were purchased at a cost of $2.40 per pound.
b.	The company produced only 1,020 units, using 9,180 pounds of material. (The rest of the material purchased remained in raw materials inventory.)
c.	Six hundred and ten hours of direct labor time were recorded at a total labor cost of $7,320.

Required:

Compute the materials price and quantity variances for the month. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

References

eBook & Resources

Answer 1

Requirement:

Computation of Material Price and Quantity Variances:

Given data,

Standard Price of Direct Material, SP                                                       = $2.5

Actual Price of Direct Material, AP                                                            = $2.4

Actual Quantity, AQ                                                                                        = 9180 pounds

Standard Quantity, SQ for actual output                                                                = 5.3 * 1020 = 5406 pounds

[1unit – 5.3 pounds, 1020 units - ? pounds]                         

Material Price Variance = (Standard Price – Actual Price) * Actual Quantity

= (2.5-2.4) * 9180

= $918 F

``Material Quantity Variance = (Standard Quantity – Actual Quantity) * Standard Price

= (5406 - 9180) * 2.5

= $9435 U