Question

Exercise 10-6 Direct Materials and Direct Labor Variances [LO10-1, LO10-2] 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 4.6 pounds $ 2.50 per pound $ 11.50 Direct labor 0.2 hours $ 12.00 per hour $ 2.40 During the most recent month, the following activity was recorded: a. Twenty thousand pounds of material were purchased at a cost of $2.35 per pound. b. All of the material purchased was used to produce 4,000 units of Zoom. c. 750 hours of direct labor time were recorded at a total labor cost of $10,425. Required: 1. 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).) 2. Compute the labor rate and efficiency 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).

Answer 1

Answer

• Working for data

Actual DATA for		4000	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	20000	$                   2.35	$           47,000.00
Direct labor	750	$                13.90	$           10,425.00

Standard DATA for		4000	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 4.6 pounds x 4000 units)=18400 pounds	$                   2.50	$       46,000.00
Direct labor	( 0.2 hours x 4000 units)=800 hours	$                12.00	$         9,600.00

• Requirement 1

Material Price Variance	$                                                     3,000.00	Favourable-F
Material Quantity Variance	$                                                     4,000.00	Unfavourable-U

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                                2.50	-	$                       2.35	)	x	20000
	3000
	Variance		$              3,000.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	18400	-	20000	)	x	$                           2.50
	-4000
	Variance		$              4,000.00			Unfavourable-U

• Requirement 2

Labor Rate Variance	$                                                     1,425.00	Unfavourable-U
Labour Efficiency Variance	$                                                        600.00	Favourable-F

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                              12.00	-	$                    13.90	)	x	750
	-1425
	Variance		$              1,425.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	800	-	750	)	x	$                        12.00
	600
	Variance		$                  600.00			Favourable-F