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 Standard Price Standard Hours or Rate Cost $3.00 per pound $10.00 per hour 6.20 pounds 0.40 hours $18.60 4.00 Direct materials Direct labor During the most recent month, the following activity was recorded: a. Twelve thousand pounds of material were purchased at a cost of $2.90 per pound. b. The company produced only 1,200 units, using 10,800 pounds of material. (The rest of the material purchased remained in raw materials inventory.) c. 580 hours of direct labor time were recorded at a total labor cost of $6,960. 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.) Materials price variance Materials quantity variance

Answer 1

Answer

• Material Price Variance = $ 1080 F [See NOTE]

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity used
(	$                                3.00	-	$                       2.90	)	x	10800
	1080
	Variance		$              1,080.00			Favourable-F

NOTE:
If above comes INCORRECT, use Actual quantity purchased, which is 12000 pounds,
The Variance would be $ 1200 Favourable.

• Material Quantity Variance = $ 10080 Unfavourable

Material Quantity Variance
(	Standard Quantity = 1200 units x6.2 pounds	-	Actual Quantity	)	x	Standard Rate
(	7440	-	10800	)	x	$                           3.00
	-10080
	Variance		$            10,080.00			Unfavourable-U