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 7.80 pounds 0.30 hours Standard Price or Rate $2.50 per pound $6.00 per hour Standard Cost $19.50 $ 1.80 Direct materials Direct labor During the most recent month, the following activity was recorded: a. 9,300.00 pounds of material were purchased at a cost of $2.20 per pound. b. All of the material purchased was used to produce 1,000 units of Zoom. c. 200 hours of direct labor time were recorded at a total labor cost of $1,400. 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 (.e., zero variance). Input all amounts as positive values. Round your intermediate calculations to the nearest whole dollar.) I Materials price variance Materials quantity variance Labor rate variance Labor efficiency variance

Answer 1

Solution

Material Price Variance	$           2,790.00	Favourable-F
Material quantity variance	$           3,750.00	Unfavourable-U
Labor rate variance	$               200.00	Unfavourable-U
Labor Efficiency variance	$               600.00	Favourable-F

Working

Actual DATA for		1000	Items
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	9300	$            2.20	$          20,460.00
Direct labor	200	$            7.00	$            1,400.00

.

Standard DATA for		1000	Items
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 7.8 pounds x 1000 Items)=7800 pounds	$                   2.50	$            19,500.00
Direct labor	( 0.3 Hour x 1000 Items)=300 Hour	$                   6.00	$               1,800.00

.

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    2.50	-	$                     2.20	)	x	9300
	2790
	Variance		$             2,790.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	7800	-	9300	)	x	$              2.50
	-3750
	Variance		$             3,750.00			Unfavourable-U

.

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                    6.00	-	$                     7.00	)	x	200
	-200
	Variance		$                 200.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	300	-	200	)	x	$              6.00
	600
	Variance		$                 600.00			Favourable-F