Question

(Please show calculations for study purposes)

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	7.10	pounds	$	2.50	per pound	$	17.75
Direct labor	0.50	hours	$	14.50	per hour	$	7.25

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

1. Thirteen thousand eight hundred pounds of material were purchased at a cost of $2.40 per pound.

2. The company produced only 1,380 units, using 12,420 pounds of material. (The rest of the material purchased remained in raw materials inventory.)

3. 790 hours of direct labor time were recorded at a total labor cost of $9,480.

   Required:

   Compute the materials price variance and the materials quantity variance for the month.

Answer 1

Materials price variance = (Actual quantity purchased * Actual price) - (Actual quantity purchased * Standard price)

= (13,800 *$2.4) - (13,800 * $2.5)

= $33,120 - $34,500

= $1,380 Favorable

Materials quantity variance = (Actual quantity used * Standard price) - (Standard quantity * Standard price)

= (12,420 * $2.5) - [(1,380 * 7.1) * $2.5]

= $31,050 - $24,495

= $6,555 Unfavorable