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 Standard Cost $ 13.30 500 Quantity or Standard Price or Rate 2.30 per pound $10.00 per hour Hours Direct materials Direct labor 6.00 pounds 0.50 hours During the most recent month, the following activity was recorded: a. 11.000 pounds of material were purchased at a cost of $2.10 per pound. b. All of the material purchased was used to produce 1,500 units of Zoom. c. 500 hours of direct labor time were recorded at a total labor cost of $6,500. 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 effe ct (i.e., zero variance).) Direct materials price variance Direct materials quanthy 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).) Direct labor rate variance Direct labor efficiency variance

Answer 1

Direct material price variance = (standards price - actual price ) × actual quantity

Direct materials price variance= (2.3 - 2.1) × 11,000= 0.2× 11000

Direct materials price variance = 2200 Favourable

Direct materials quantity variance = ( standard quantity - actual quantity ) × standard price

Actual quantity = 6 pounds × 1500 units= 9000

Direct materials quantity variance = (9000- 11000) × 2.3

Direct materials quantity variance =4600 unfavorable

Direct labor rate variance = (standard rate - actual rate) × actual labor hours used

Direct labor rate variance= (10 - 6500/500) ×500

Direct labor rate variance = (10- 13) × 500= 1500 unfavorable

Direct labor efficiency variance = (Standard hours for actual production - Actual hours) xStandard rate

Direct labor efficiency variance = (0.5 × 1500 - 500) × 10= 2500 favourable